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The debt protection gap

The debt protection gap 1.95 MB

The cost of living crisis has left millions of households unable to afford their essentials. Despite prices falling from their peak, energy costs remain particularly challenging:

  • Energy debt is now the most common debt our specialist debt services help people with.

  • The average energy debt owed by our clients is now over £1,840, a 21% increase since last year.

  • Total energy debt for domestic consumers has now reached over £3bn, rising more than 50% in a year, and extra debt costs are adding £28 a year to the average energy bill.

As more people have come to us about issues with energy debt, we’ve also seen an increase in some harmful debt collection practices. We’re particularly concerned that:

  • Some suppliers still aren’t always following Ofgem rules on offering affordable debt repayment plans.

  • Some suppliers are using Debt Collection Agencies (DCAs) while consumers are still trying to agree a repayment plan.

  • Our Consumer Service is helping a growing number of people facing court enforcement, which can cause distress for some vulnerable consumers and add significant costs to their debt

The use of methods like court enforcement may increase now that Ofgem has introduced tougher rules on force fitting of prepayment meters to collect debt to prevent the abuses we saw by some firms last winter.

As part of this research we’ve identified good practice by some suppliers, which we spotlight in this report. Voluntary industry commitments are also enabling suppliers to demonstrate how they go further than mandated to support their customers.

However, this isn’t enough to protect all consumers and enable Ofgem to respond to emerging risks, which may grow as suppliers seek to recover more debt. Ofgem should close the gaps in protections for the most vulnerable consumers. 

Ofgem should:

  • take tough compliance and enforcement action to ensure suppliers offer affordable repayment plans.

  • issue guidance on the appropriate situations in which suppliers should use Debt Collection Agencies.

  • limit the use of court action and enforcement where they put consumers at risk of significant harm.

While these actions will tackle some key risks, the problem of energy affordability and debt can’t be solved by Ofgem and suppliers alone. The Government also needs to act. We’re calling for better targeted bill support for those at risk, and more funding for independent debt support which can find sustainable solutions for people.