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Ofgem reforms could see £1.4bn of credit balances automatically returned 

Ofgem is consulting on proposals to limit the amount of consumer credit balances suppliers can hold, which could see as much as £1.4bn going back to customers.

Ofgem’s research found that many customers who pay by fixed direct debit are overpaying resulting in surplus credit balances. The regulator said that it is concerned that some suppliers may use customers’ surplus credit balances to fund otherwise ‘unsustainable’ business practices.

 

The proposed ‘auto-refund’ policy would require suppliers to refund any credit balances for domestic credit customers paying by fixed direct debit, above £0 each year, on the anniversary of when the contract started.

 

The ‘auto-refund’ proposal would stop surplus credit balances growing year-on-year but would not stop suppliers building up surplus credit balances during the year. To address this risk, Ofgem said it is also proposing to introduce a credit balance threshold for all domestic suppliers.

 

If confirmed, the proposals would be rolled out from 2022.

 

Jonathan Brearley, chief executive of Ofgem, said: “These new proposals would ensure that suppliers are not holding onto more of customers’ money than absolutely necessary.

 

“This is an important step in making the retail energy market fairer for customers at a time when many are facing financial hardship.”

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