How to demand a refund as suppliers use your credit balances as their bank

A study of thousands of online reviews left by customers over the past three years shows the extent of sly increases to direct debit payments and unacceptable delays in making refunds by many gas and electricity providers.

 

The investigation by Switchcraft, a service that automatically moves consumers to cheaper tariffs, shows that nearly a quarter of customers' complaints related to overcharging or having direct debits increased – despite being in credit.

Some in the 3,500-strong sample saw monthly payments rise by up to 40 per cent, even though suppliers owed them money. 

In more than 50 cases, households reported direct debit increases without any prior notice – even though customers should be notified at least ten days in advance of any rise.

A dozen providers have gone bust in the past year. Toto Energy, which had 134,000 customers, last week became the latest casualty and further failures are expected this winter.

It is estimated that suppliers are holding on to more than £1.5billion of customers' cash.

If a supplier fails, credit balances are ring-fenced under rules set by regulator Ofgem. A new supplier is chosen to take responsibility for abandoned customer accounts.

But there have still been problems. Customers of Extra Energy, for example, which went into administration in November last year, waited months for a refund.

A final bill is needed before overpayments are returned, but the last wave of final bills only hit doormats or email inboxes last month.

Overpayments have swelled in the past decade as automatic direct debits are now the payment method for 70 per cent of households, compared to 20 per cent in 2007 – when a lot of people would have paid on receipt of a bill.

Paying via direct debit is usually a condition for signing up to cheaper tariffs. It also suits many households – until a provider goes bust.

As a result of recent company failures, Ofgem has announced new rules to ensure suppliers do not compromise customer service standards by growing too quickly.

Ofgem will now have the power to request an independent audit of a company's finances that could result in a supplier being prevented from taking on new customers if they are failing existing ones.

 

Companies will also be required to have 'exit arrangements' in place in case they fail. But the implementation of these new rules won't happen until next year at the earliest.

Get your money back

Have you overpaid? Get your money back

If you have overpaid for gas and electricity, demand a refund of any credit.

Provide and keep records of actual meter readings rather than relying on estimated ones from suppliers.

This will avoid giving suppliers leverage in billing disputes, as some of the onus is on customers when it comes to accurate billing.

If you are owed a refund from an old supplier after switching away it should be paid within ten days of receiving a final bill – otherwise you are entitled to automatic compensation of £30.

This is thanks to new Ofgem rules introduced earlier this year (it does not apply to customers transferred from a failed supplier).

Suppliers acting unfairly can be referred to the Energy Ombudsman, which settles disputes between providers and customers. Visit ombudsman-services.org/energy or call 0330 440 1624.

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