Ofgem’s tough new rules on force fitting prepayment meters (PPMs) may result in more cases of suppliers seeking legal action against indebted customers, Citizens Advice has warned.
There are increasing numbers of consumers facing legal action from their energy supplier due to them being in debt, with the charity seeing almost double the number of people seeking its advice about court action in 2023, compared to 2022.
In total the service received 349 cases about court action last year, compared to 179 cases the year before. This, it added, does not include cases dealt with by local Citizens Advice offices, and so is an underestimate of the total number of people the charity supported with court action for energy debt.
The charity has further warned that the use of methods like court enforcement may increase now that Ofgem has introduced tougher rules on force fitting PPMs to collect debt.
In its new report, The debt protection gap, Citizens Advice explained that energy companies may take legal action against indebted customers and if the consumer does not respond to court letters, they may be given a County Court Judgment (CCJ).
The report said: “Suppliers we spoke to said they used CCJs to try and recover debt infrequently and that they would always assess the suitability of issuing a CCJ to a customer.
“Many suppliers said there were certain groups of people they would never issue a CCJ to, for example customers who are on the Priority Services Register.
“Some suppliers also said they would find out whether the customer had other outstanding unpaid CCJs and so would be unlikely to be able to pay the debt if they were issued a further CCJ.”
However, the charity warned that court action is sometimes used against vulnerable consumers who have difficulty engaging with their supplier.
It also has concerns about the use of High Court Enforcement Officers (HCEOs) to enforce CCJs for energy debt which can lead to additional fees being charged and can result in goods being removed from individuals’ homes.
“High court enforcement cannot be used for consumer credit debts, due to protections in the Consumer Credit Act, but can be used for energy debts subject to a CCJ of £600 or more. We are concerned that some suppliers may seek to take advantage of this ability to enforce judgments through a more aggressive legal route,” the charity added.
Recent research by the charity found that two thirds of people experienced harassment or intimidation from bailiffs collecting debts, while half said that poor bailiff behaviour impacted their long-term financial situation. Three quarters meanwhile said that poor bailiff behaviour affected their mental health.
Citizens Advice’s report makes a number of recommendations for Ofgem.
These include identifying groups suppliers should not use court action against including those with severe physical or mental health conditions.
Ofgem should also:
- Increase requirements to make proactive communication attempts with consumers ahead of court action
- Require that suppliers’ policies on using court enforcement have board level sign off
- Ensure that there is senior level sign off when suppliers use enforcement via HCEOs
- Ensure that where suppliers do use high court enforcement that they only use firms accredited by the Enforcement Conduct Board
The regulator should also improve monitoring of how suppliers use court action to recover debt. This could be achieved through adding additional reporting requirements to its existing Social Obligations Reporting.
Commenting on the findings Daniel Portis, deputy director at Energy UK, said: “Suppliers only use court action as a last resort after repeated attempts to address debt with the customer have been unsuccessful. While record debt is a big concern for the sector, Citizens Advice has noted that the numbers of county court judgments are still relatively low.
“Suppliers will assess whether court action is appropriate in each case, especially for vulnerable customers – for some of whom it will never be used.”
Portis added that suppliers have pledged to go “further than ever before” by providing tens of millions of pounds of discretionary support and voluntary Debt Commitments.
A spokesperson for Ofgem said: “Prices are slowly falling as the energy market stabilises – but many people have been struggling to pay their energy bills amid unprecedented cost of living increases across the board, and the legacy of this risks becoming an enduring problem.
“We have taken action already and have changed standing charges for PPM customers so they are not charged more than anyone else. We have also toughened up requirements on suppliers to take care of their customers, and to actively identify anyone who may be struggling to pay their bills and offer support.”
The spokesperson pointed to the regulator’s recent call for input which is examining issues around affordability and debt.
“We need to look at energy affordability as a whole – what’s working, what is not and where are the gaps,” they added.