Energy firms use direct debits as 'free loans'

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A consumer group has accused energy companies of overcharging customers and using their money as interest-free loans.

Research from Which? claims that suppliers are taking unnecessary high direct debit payments from their customers each month, with 25% of those surveyed more than £100 in credit and 8% more than £200 in credit.

The poll showed electricity customers were, on average, in credit by £74 while gas customers were owed an average of £84 by their supplier.

Which? says energy companies are overestimating monthly bills, with many customers concerned that their direct debit demand are set too high. Although those in credit will see their money again, they are potentially losing out on interest it could be earning in a savings account.

Martyn Hocking, editor of Which? Money, says: “It seems incredible that energy companies can take hundreds of pounds more than they need to from their customers, and profit from the interest that this money will earn at our expense.”

Energy companies have one of the lowest customer satisfaction ratings, according to the Which? research, with Npower the least popular energy provider. It achieved a satisfaction score of just 30%, compared to Utility Warehouse, which achieved the highest customer satisfaction score of 83%.

However, Garry Felgate, chief executive of the Energy Retail Association, says the research does not reflect the experience of the vast majority of direct debit customers.

“It fails to recognise that energy companies aim to ensure that a customer’s account is balanced over the year,” Felgate adds. “This means that there will be periods when a customer is in debit, effectively receiving a loan at that time, and there will be corresponding periods when they are in credit to their supplier.”