Customers in debt may face ‘unintended risks’ following SoLR process

A lack of regulatory clarity over how consumers in debt are treated when their supplier fails could lead them to face “unintended risks”, a former Labour shadow chancellor has warned.

Chris Leslie, who is current chief executive of the Credit Services Association (CSA) trade body, has written to Ofgem boss Jonathan Brearley calling on the regulator to issue guidance on how the administrators of failed suppliers should deal with customers in debt.

He also called for more of a focus on the quality of customer data transferred after a market failure, arguing that even a minor inaccuracy can have “profound implications” which can contribute to a poor customer journey.

In the letter, seen by Utility Week, Leslie argued that while it is clear customers with credit balances will be protected under the supplier of last resort (SoLR) process, the picture is less clear in relation to those in arrears.

“Those customers may find themselves and their debt transferred to a new supplier, or their debt may remain with the administration and liquidation of the failed supplier. Under the circumstances, it is therefore possible that those customers may face unintended risks as a consequence,” he said.

Although Ofgem does not currently regulate administrators of failed suppliers, Leslie wants the regulator to consider how best to reassure customers and be clear in particular about what happens to arrears owed to firms in administration.

The former shadow chancellor raised concerns about the quality and integrity of customer data, especially for customers whose debts remain with those administering a failed supplier.

He said: “In those cases, not only will it be crucial that the administrator adheres to the same standards as you would expect from a supplier, but also the new supplier will need to be aware of the existence of the debt, even if it is not responsible for its recovery.

“The new supplier, for example, may need to make adjustments to manage the effects of unexpected pricing changes, or to continue or adapt forbearance measures even if it does not deal directly with any outstanding arrears.”

Clarity and accuracy of data, he added, will be critical in achieving “effective and appropriate treatment” for indebted  customers and in ensuring they are “informed and engaged with”.

Elsewhere, the letter called on Ofgem to be proactive in its communications strategy for transferred customers who are in financial difficulty.

“We would ask that, if it has not already done so, Ofgem considers a proactive communications strategy for those transferred customers who are in difficulty which encourages early engagement and identifies who the customer should be engaging with.

“This, in parallel with Ofgem’s past expectations urging both administrators and new suppliers to ensure best practice in exercising forbearance, should result in a more positive outcome for the customer, particularly if Ofgem is able to persuade those responsible for regulating those administrators to ensure those expectations are met.”

Responding to the letter, an Ofgem spokesperson said: “Ofgem set out its expectations for insolvency practitioners collecting customer debt after a supplier of last resort is appointed in an open letter published in May last year.

“Insolvency practitioners are required to abide by the same regulatory requirements and contractual duties as energy suppliers when dealing with consumers. We expect insolvency practitioners to treat consumers fairly when carrying out any charge recovery action.”