Debt recovery lessons from the water sector
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Photo Credit: Ian Sane via Compfight cc

Debt recovery practices in several sectors have come under criticism in recent weeks, particularly for the practice of writing to customers under the pseudonym of a law firm, when in fact the letter was prepared in-house at an energy supplier, payday loan lender, or most recently, at one of a number of water companies.

BBC Radio 4’s You and Yours programme reported that 12 of the largest water suppliers in the UK had admitted to sending letters from in-house with the name of a debt collection company at the top, and five said they are still doing so or will carry on doing in the future.

However, this may conflict with Ofwat guidance sent out in July 2014, when the regulator distributed its revised guidelines for dealing with household customers in debt, which it said had been updated in part to “avoid any misunderstanding of Ofwat’s views regarding companies’ use of in-house debt collection agencies”.

Five broad principles form these guidelines, including:

  • a commitment to contact customers as early as possible when they fall into debt and throughout the debt management process;
  • a commitment to provide a range of possible payment methods and frequencies;
  • a commitment to non-threatening, courteous and plain English communication;
  • a commitment to take the customer’s circumstances into account when agreeing payment arrangements;
  • a commitment to provide a consistent level of service to customers whose accounts have been referred to debt management companies.

Companies who do not clearly indicate that a debt recovery letter has been sent from in-house, rather than by a third-party debt recovery firm or solicitors, risk falling outside of the guidelines’ principles on plain English and transparent communication.

Importantly though, water companies are of course still permitted to pursue for payment – and as they may not legally be allowed to cut off supplies to household customers, doing so promptly is an important measure to avoid unnecessary financial losses.

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