In 2014, Ofgem, the UK’s energy regulator, came up with a new set of rules for brokers and suppliers to follow. This was done to protect businesses from mis-sold energy contracts that had become increasingly commonplace.
Even though these rules have helped to curtail the prevalence of mis-sold business energy contracts, there are still reports of mis-selling going on.
As a result, many businesses continue to pay more for their gas and electricity than they should. And according to Ofgem, these mis-sold business energy contracts are costing UK’s businesses hundreds of millions of pounds.
We understand that it is difficult for businesses to know if they have been a victim of a mis-sold business energy contract. This is usually because energy suppliers are not that forthcoming about how they charge for their services.
But in this guide, we will lay bare some of the tactics that energy companies and their representatives have used to mis-sell energy contracts and, if this has happened to you, show what you need to do to begin your compensation claim.
Why Do Mis-sold Business Energy Contracts Happen?
It is estimated that roughly half of all small businesses engage a Third Party Intermediary (or TP1) to find a suitable utility company.
Brokers act as a middleman between the energy supplier and the business needing a new energy contract. As a result, the chances are that you may have interacted with a broker when looking for a supplier to provide your home or business premises with energy.
TPIs are individuals or organisations that offer energy related advice and generally include brokers, switching sites and any company that offers support in the procurement of energy. Their purpose is to provide advice and/or recommendations to help you buy energy for your business and manage your energy needs. They will often negotiate a tariff/contract on your behalf, after establishing your business energy usage and requirements.
It is important to note, however, that some brokers are ‘tied’ to a specific energy supplier and may only be comparing tariffs for one provider, rather than searching the whole energy market on your behalf. They should make it clear whether they are truly independent or not, and state which energy suppliers they are comparing for you.
Although energy TPIs use various methods to charge for their services, most of them earn commission based on the number of deals they close.
Energy suppliers have also been known to offer TPIs incentives to sell their particular energy contracts above another competitor, which may skew the advice and recommendations being made by the broker.
Broker fees can also increase the supplier’s energy unit price and, for this reason, many TPIs have been known not to disclose how they are getting paid.
Rogue energy brokers tend to make misleading statements and recommendations that are driven by financial motives rather than the client’s needs. And, this is why business energy mis-selling has sadly become quite common.
Reports suggest that around half of businesses who have used a third party intermediary to negotiate their energy supply have been unhappy with the service provided and, as such, complaints have been rising in this area.
To make matters worse, only a small percentage of energy brokers in the UK have registered for self-regulation. That means only a small proportion of them are open to following the strict code of practice that encourages transparency with customers.
Which Tactics Do TPI Brokers Use To Mis Sell Energy?
Unscrupulous energy brokers use a variety of improper practices to seal the deal, all whilst acting in their own best interests rather than that of the client. Below are some of the different types of questionable tactics they use to mis-sell energy contracts.
Aggressive Sales Tactics
Whether it is through fixed pricing models or commissions, brokers get paid one way or another after placing consumers with an energy supplier. As such, some have been reported to use unethical marketing techniques to win as much business as possible.
The most aggressive energy TPIs tend to use pushy sales pitches and techniques to convince any potential client to sign up with utility companies that pay them a finder’s fee.
For instance, you could be pressured into signing a deal after being told that the offer is only valid for one day, leading to a panic-buy situation. Other salespeople may make the unethical claim that buying a product like a prepayment card or token could help you save energy.
Some brokers may even go as far as tricking you into signing documents under the pretence that it is a necessary formality to confirm their visit, read your meter, or get a quote etc.
You may also have fallen victim to a mis-sold business energy contract by giving out your personal information over the phone, as a result of constant harassment from unsolicited calls.
Lack Of Transparency
Another reason why businesses may end up with unsuitable energy contracts is that they were denied vital information, thus making it impossible to make an informed choice. It is possible that unethical brokers do this deliberately, to avoid disclosing details that may give potential clients second thoughts.
A common example of this, is by handing out pass-through contracts. On the surface, such energy plans look quite attractive when you look at the unit price of power (per kilowatt-hour) or LPG (per litre).
However, in reality, other levies and charges will apply, which can add a significant amount to your energy consumption costs. This information may have been left out on purpose, thus giving the impression that the contract will save you money when it will not.
This is how many consumers get tricked into signing up for a high tariff plan, only to realise later when receiving the energy bill that the costs are way beyond what they were initially quoted.
Other unexpected charges you may not be informed about include cancellation fees, as well as the full cost of installation.
In addition, some energy brokers may not want you to know that you are entitled to a 14-day cooling-off period. During this time, you can choose to enter into a contract or terminate it without penalties, in case you change your mind.
If this was never brought to your attention and you are now stuck with an undesirable energy contract, then your broker could stand accused of mis-selling.
Some rogue brokers resort to fraudulent practices when selling energy contracts. For instance, some of them may try to win buyer confidence by posing as officials from Ofgem or Citizens Advice.
Others make calls claiming to be from your energy supplier, as a ploy to get your metre information and contact details, and then sell it to other parties.
You may also receive fake calls about the DCP161 regulation from a rogue broker requesting you to apply for more capacity. If you don’t have a half-hourly metre, this may be an attempt to get you to sign up for a higher rate.
In some cases, a salesperson could even mislead you into switching suppliers without knowing.
What Are The Types Of Mis-sold Business Energy Contracts?
The most common types of mis-selling engaged by brokers are given as follows;
Hidden Commission Contracts:
Rogue energy brokers usually refuse to be transparent with their fees and commissions.
They offer their customers energy contracts that include a sizeable undisclosed commission, without letting the customer know at the time the contract is being signed.
When taken at face value, a pass-through contract is one with a lot of benefits for the customer. After all, customers only need to pay a low kilowatt per hour (kWh) price.
However, pass-through contracts don’t include all the levies, fees, and charges that make up a major part of the bill. So, when the customer receives their first bill, the amount charged is usually much higher than the price that was agreed on.
When brokers offer customers a pass-through contract, their sales pitch is often worded in such a way that they can be absolved of any liability. In addition, they are usually eager to sell as soon as possible, so may employ time pressure tactics.
How Do I Know I Have Been A Victim Of Mis-sold Business Energy Contract?
If any of the below situations happened to you, then you may be eligible to make a claim for compensation.
- You were not given a full description of the service or product
- You were harassed with calls which coerced you to provide information over the phone
- You were not given correct information about the prices and tariffs
- You were asked to sign something to get a quote
- You were not told about any delivery or installation expenses
- You were not given an estimate of your energy bill for an entire year if you signed up for their tariff or, if they did, they didn’t tell you how they arrived at this estimate
- You were not given an advance notice that they were sending a salesperson to you
- You were asked to buy energy-related items such as a smart card, pre-loaded prepayment key or token
- You were asked to buy a product that could help you save energy
- You were told the offer was only available for today
- You were asked to buy a prepayment card so you could have discount on your bill
- You were told your contract was nearing its end and you needed to urgently sign a new one
- You signed a Level 2 letter of authority which gave them authorisation to sign contracts on your behalf without telling you beforehand
What Should I Do To Get Compensation?
To get compensation for a mis-sold business energy contract, you need to do the following:
Make A Complaint To The Company
The first step towards getting compensation for a mis-sold business energy contract is to get in touch with the company liable for the contract.
Typically, the company should have a complaints process that you can follow to inform them about the issue. If they don’t, you can make your complaint on the phone, by email or in writing.
In your complaint, explain the problem in clear and concise terms. Also, tell the company the kind of resolution to the issue that will suit you. Once the company gets your complaint, they are required to respond and should aim to solve the issue the way you want it.
To truly understand the problem, the company might request for permission to take a meter reading at your home or ask you to provide more information.
Remember, the company has a time limit of eight weeks to resolve your problem. If they refuse to respond to you during that time or you are not happy with the solution they provided, you should complain to the ombudsman.
Take Your Case To The Energy Ombudsman
The Energy Ombudsman is a service that is unbiased, free, simple, and independent. In your complaint to the ombudsman, write a detailed narration of the issue and how you want it to be resolved.
Also, attach the correspondence between you and the company, the contract, receipts, bank statements and any other documents that can help your case.
The service will appoint an adjudicator to look through the complaints and evidences from both you and the company.
Based on the information provided, the adjudicator will arrive at a decision that is legally binding to the company, if you choose to accept it. But if you are still dissatisfied with the decision of the ombudsman, you can further escalate your complaints to the courts.
Use The Civil Courts
You have the option of using the civil courts to resolve your complaints if you reject the ombudsman’s decision.
In any case, this is not a decision that should be taken lightly. It is advisable that you sit down with a solicitor experienced in mis-sold business energy contracts and go through your evidence, so they can ascertain if you have a valid claim and your chances of winning .
Ideally, you should only go ahead with the courts if you are sure that you will get a decision that will be more to your liking.
If you are uncertain that the court’s decision will differ from that of the ombudsman, then it might just be a waste of time. Besides, you might not be able to handle the time-consuming and costly court process.
Mis-sold Business Energy Contracts: Get Help Starting Your Claim
Competent, professional and ethical energy brokers offer an invaluable service to businesses that is much needed in the industry.
But, when some unscrupulous brokers decide to take advantage of their customer’s situation using underhanded tactics, then it is only reasonable that you seek justice.
Although we cannot say exactly how much you or any other business would receive for such a claim, figures suggest the average claim in the UK for mis-sold business energy is around £25,000.
But, dependent on the individual circumstances, a successful claim could be anywhere from £2000 to over a £million. Businesses small and large have fallen victim to this type of unethical financial mis-selling and we can help you seek the compensation you deserve.
If you would like some help to get your claim moving, you can arrange a free no obligation call with a claims advisor using our form below. You’ll be able to find out if your claim qualifies and the first steps needed to start your claim.