Posted: 14:49, 15 April 2022 | Updated: 14:58, 15 April 2022
Energy regulator Ofgem has warned gas and electricity suppliers that they could face fines and possibly lose their licenses if they try to exterminate consumers during the cost-of-life crisis.
The regulator said it was reviewing the amount of companies raising direct debits after the “unprecedented” 54 per cent rise in the energy price cap on April 1st.
Some 4.3 million customers have also relocated to alternative companies when their gas or electricity supplier collapsed as a result of market instability.
In a blog post, Ofgem CEO Jonathan Brearley said: “We are also seeing alarming signs that some companies are reacting to these changes by allowing customer service levels to deteriorate.”
Ofgem CEO Jonathan Brearley, pictured, has written a blog warning energy companies about the deterioration of their customer service during the cost of living crisis.
The energy price ceiling jumped 54 percent on April 1 with further increases expected later this year
He continued: “For example, there have been concerns that some suppliers may have increased direct debit payments more than necessary or directed customers to invoices that may not be in their best interest. “We have also seen disturbing stories about how some vulnerable customers are treated when they face difficulties.”
He warned energy companies “now more than ever we need suppliers to comply with the requirements of their license on how to work with customers in financial difficulty.”
Energy companies will now face stricter oversight of how they handle direct customer charges and “ensure that companies meet higher standards for overall customer service performance and vulnerability protection.”
According to Ofgem: “When they do not, we will not hesitate to take swift action to enforce compliance, including the imposition of significant fines.”
The regulator said it was also “going to tackle the abuse of customers’ credit balances and renewable energy payments”.
Some of the collapsed gas companies used money paid by customers to support their businesses instead of paying for energy or developing renewable energy sources.
Ofgem has warned energy companies that they are taking action if they fail to properly handle vulnerable customers, such as retirees, or if they set direct debit payments too high. Companies have also been warned not to use customers’ money as a form of interest-free financing
Mr Brearley warned: “Customer credit balances should only be used to settle accounts, not as a source of risk-free capital. That is why we are considering options to reduce credit balances and renewable energy payments in such a way that they are protected in the event of a supplier failure. ”
In addition to energy bills, consumers are facing rising costs with the Bank of England warning that the squeeze could lead to default on loans and credit cards.
The Bank of England’s latest credit rating survey showed that lenders predicted that mortgages, unsecured loans and business loans would jump into bankruptcy in the three months to May.
However, the companies stated that they expect the losses from these loans to remain stable for the period.
It comes after banking companies and lenders said they saw a decline in default on both secured and unsecured loans in the last quarter to February.
Lenders also told the central bank that they plan to reduce the mortgage by the largest amount since the pandemic began.
Rising interest rates have led lenders to limit their supply of mortgages and tighten certain eligibility criteria.
Sarah Coles, senior financial analyst at Hargreaves Lansdown, said: “With rising inflation and dramatic price increases for many of the necessities, it has forced more of us to borrow to make ends meet.
“Credit card lending has grown faster than any other month recorded in February – the most recent month for which we have data.
“But while this seems like a solution in the short term, you create problems for the future because you add interest and repayments to the ever-increasing mountain of monthly spending, which makes it increasingly difficult to maintain our finances top each month.”
