Ofgem tells suppliers to review direct debits 

Out of a total of 17 large suppliers in the market, the majority were found to only have minor issues - but five were found to have “moderate or severe” weaknesses - with Ofgem “demanding” immediate action. 

This initial snapshot of findings and suppliers affected will now have to submit action plans within two weeks to set out how they’ll take the required actions. These will then be scrutinised by Ofgem for effectiveness and comprehensiveness. 

And although the regulator has not found evidence of unjustifiably high direct debits - as an additional reassurance for consumers - the regulator will require all suppliers that increased their customers’ direct debits by more than 100% to review them. 

In addition to this - where appropriate - Ofgem expects suppliers to adjust any miscalculations, including making repayments if needed, and consider whether a goodwill payment is warranted. 

Overall, the review found that more than seven million energy consumers on a Standard Variable Tariff (SVT) saw an increase in their direct debit between February and April 2022, with direct debit levels for customers on an SVT, on average, increasing by 62%. Most of this reflects the increased cost of gas. 

In addition to this, eight percent of SVT customers seeing an increase experienced an increase of more than 100%. This is of concern for Ofgem, which to ensure there’s a good reason for this increase. 

There’s also evidence that some suppliers’ processes are not as robust as they could be. This could lead to inconsistent, incorrect or poor treatment for customers. 

Finally, the review found there was a lack of formally documented policies and processes within some suppliers, which risks inconsistent and poor consumer outcomes. 

While the regulator recognises increases experienced by consumers will differ depending on a range of factors, it’s for suppliers to ensure direct debits are set correctly based on all relevant information - and they clearly communicate any changes in a way that helps consumers understand their payments. 

Commenting on the review, Ofgem’s chief executive Jonathan Brearley said: “We know how hard it is for energy customers at the moment so it’s crucial that the amount they pay each month in direct debits is right so they can manage their money.

“Suppliers must do all they can, especially during the current gas crisis, to support customers and to recognise the significant worry and concern increased direct debits can cause. 

“We know there is some excellent service out there, but we want to make sure that it’s consistent and standard across the board. It’s clear from today’s findings on direct debits that there are areas of the market where customers are simply not getting the service they need and rightly expect in these very difficult times."