- Cornwall Insights forecasts the October Price cap to rise by 78%! with fresh calls of protest by Don’t Pay UK for a massive UK bill cancellation.
- Defaulting on energy bills could cost consumers a minimum of 480 points off their credit score.
- Those customers would be pushed into the “very poor” credit category, more than doubling the cost of any new finance they might need.
- Customers would lose access to any fixed tariff prices they might be on.
- Defaulting customers might be forced onto prepayment meters that cost more than credit-based tariffs PLUS cost up to £150 to fit.
- Energy companies have promised swift legal action against those who refuse to pay.
Debt help website DebtBuffer.com warns that cancelling your direct debit and refusing to pay your energy bill in protest, could have disastrous financial consequences for those consumers and might push them into a debt trap they won’t be able to escape from, regardless of any justification.
Last week in an Interview with Peston, Martin Lewis warned of a growing consumer movement for a mass non-payment of energy bills in what is described as a “poll tax moment”.
This movement is being spearheaded by a Twitter account called Don’t Pay UK. It now has close to 12k followers and is rapidly gaining momentum after last week’s press. Their goal is to get 1 million people to cancel their direct debits for October the 1st if the Government does not intervene to help bring energy prices back to affordable levels.
Energy companies, such as the recently bailed out Bulb, were last week promising to take swift legal action on those consumers that do not pay:
DebtBuffer has calculated the impact this action would have on consumers’ credit scores, and it stands at a minimum of a 480-point loss. This consists of a 130-point loss for a missed payment, and a further 350-point loss if the energy company lodges a default against a customer. If an energy account is held in joint names, this would apply to both account holders.
For context, what this means is the average UK credit score (Experian) stands at 759 points, which falls within the “fair” category of 721 to 880. A loss of 480 points would reduce a person’s credit score to 279, which would firmly sit within the “very poor” category of 0 to 560.
The impact of this for many consumers would mean no longer being able to benefit from cheaper forms of credit thus financially harming them even further. The average APR’s for balance transfer credit cards sit within the 21% to 25% range at present. Arguably that is very high. However, for customers with bad credit, the APR’s available for borrowing are even higher. Adverse credit card APR rates sit around 34% and go as high as 60%, all with far lower credit limits. Similar percentage differences exist for almost every form of credit. The worse a person’s credit score, the higher the price they pay for credit.
Heather Rose, Head of Debt Help at DebtBuffer.com said: “No matter the pressures, perceived justification, or how socially acceptable the idea of defaulting on your energy bills becomes, the impact of this decision would be to add even further financial misery to consumers, reduce their options for help and ultimately cost them even more in the long run. If people are in a position where they simply cannot afford to pay, they should speak to their energy companies who are obliged to help them with a repayment plan.”
DebtBuffer also warns that it could also mean the outright refusal from many companies or lenders for many common forms of credit such as mobile phone contracts, car finance and make remortgaging or being accepted for a mortgage next to impossible for a minimum of 6 years, the length of time it takes for a default to be removed from a credit file.
Heather Rose from DebtBuffer.com also said: “If people are at a financial break point then they should seek professional debt help from a suitable debt charity or organisation that can help. Being pulled into an ill-thought-out social media movement that is increasingly gaining traction, could damage your financial health even more in the long run and is something people should carefully consider. If defaulting on your bills is something you feel is your only option, there are Government approved routes to accomplish that without leaving you vulnerable to the inevitable legal and stressful enforcement action the energy companies will undoubtedly pursue.”
THE INFO YOU MUST KNOW IF YOU ARE STRUGGLING TO PAY:
Your energy supplier has to take into account your ability to repay your energy debt. A supplier must:
- take your individual circumstances into account;
- make full use of available information, including your budget sheet;
- make it easy for you to talk to them about concerns you have around your ability to pay; and
- contact you in a timely manner to discuss whether a different repayment plan is appropriate if you miss a payment on an agreed repayment.
When your supplier knows that you are having difficulty repaying your energy bills, they must either:
- accept payments by regular instalments based on an agreed plan;
- use Fuel Direct if you are on particular benefits; or
- agree repayment through a prepayment meter, if one is appropriate for you.
Your supplier must also offer to provide energy efficiency information to help you reduce your energy charges.
ADDITIONAL DEBTBUFFER RESOURCES:
For help with Understanding Defaults & CCJ’s , learn about Are you vulnerable? And our essential Guide to Debt Collectors & your rights .