Overview
7 million people are in some form of water, energy or telecommunications debt, collectively known as utility debt. Nearly 1 million are in debt to all three.
Those in debt are overwhelmingly likely to have mental health problems. Half (53%) of those in some form of utilities arrears have a mental health problem. More concerningly, people with severe and enduring mental illnesses (SMI) such as bipolar or schizophrenia are over four times as likely to be in some form of utility debt as those without a mental health problem.
Further, being behind on essential bills can have an outsized impact on our mental health. The psychological toll of struggling to pay for essential services like heating or internet may come with an increased sense of stigma, while common debt collection processes can force customers in arrears to forgo critical usage, exacerbating poor health outcomes.
This report by Money and Mental Health Policy Institute identifies three distinct categories of debt collection practice across the three utility sectors that have significant harm built in:
• Remediation Strategies for customers are let down by high pressure practices, like threatening and harassing communications, and unrealistic repayment requirements.
• Service restrictions in the energy and telecommunications sectors which cause significant psychological harm through creating barriers to essential service. This can lead to feelings of isolation, anxiety and deprivation.
• Third party collection and enforcement action in the utilities sector is confusing, intimidating and costly, with outdated regulation potentially trapping people in financial hardship for longer.
It concludes that it’s imperative protections for those struggling with utility arrears are stepped up. These services are unique in the central role they play in our lives. Common debt collection practices in the sector risk abusing that relationship by threatening barriers between people and their needs. People with vulnerabilities, in particular, deserve greater reassurance that those services will be there when they need them.
Those in debt are overwhelmingly likely to have mental health problems. Half (53%) of those in some form of utilities arrears have a mental health problem. More concerningly, people with severe and enduring mental illnesses (SMI) such as bipolar or schizophrenia are over four times as likely to be in some form of utility debt as those without a mental health problem.
Further, being behind on essential bills can have an outsized impact on our mental health. The psychological toll of struggling to pay for essential services like heating or internet may come with an increased sense of stigma, while common debt collection processes can force customers in arrears to forgo critical usage, exacerbating poor health outcomes.
This report by Money and Mental Health Policy Institute identifies three distinct categories of debt collection practice across the three utility sectors that have significant harm built in:
• Remediation Strategies for customers are let down by high pressure practices, like threatening and harassing communications, and unrealistic repayment requirements.
• Service restrictions in the energy and telecommunications sectors which cause significant psychological harm through creating barriers to essential service. This can lead to feelings of isolation, anxiety and deprivation.
• Third party collection and enforcement action in the utilities sector is confusing, intimidating and costly, with outdated regulation potentially trapping people in financial hardship for longer.
It concludes that it’s imperative protections for those struggling with utility arrears are stepped up. These services are unique in the central role they play in our lives. Common debt collection practices in the sector risk abusing that relationship by threatening barriers between people and their needs. People with vulnerabilities, in particular, deserve greater reassurance that those services will be there when they need them.
Key recommendations
Working with firms in their sector, all utility regulators (Ofcom, Ofgem and Ofwat) should:
• Work with the government to reduce the scale of debt and arrears in each sector by introducing a range of additional forbearance and affordability measures, including social tariffs, debt matching schemes and debt write off.
• Improve communications processes to ensure people with mental health problems are supported to disclose, and that communications encourage engagement through implementing universal design and better support.
• Update guidance to bring utility providers in line with central government creditors like HMRC, who commit to only using FCA-regulated debt collection agencies.
• Require all firms to implement a pre-compliance stage to contracts with enforcement agents, to help people avoid unnecessary charges.
To protect customers from the devastating effects of disconnection from broadband and mobile services, Ofcom should:
• Implement a pre-disconnection protocol to ensure disconnection is only used as a last resort, including appropriate safeguards for vulnerable customers.
To protect customers with mental health problems from the harms associated with pre-payment meters, Ofgem should:
• Safeguard people with mental health problems through requiring firms to assess a customer’s ability to access services necessary to top up their meter when conducting a welfare visit.
HM Treasury should:
• Explore, as part of their financial inclusion strategy, the issue of disconnection from broadband and mobile services as a barrier to banking for customers who have been disconnected.
The Department for Energy Security and Net Zero should:
• Grant Ofgem the power to implement a full ban on force fitting prepayment meters.
The Ministry of Justice should:
• Amend the Taking Control (Fees) Regulations 2014 to allow for repayment plans at the compliance stage of High Court Enforcement.
Utility firms should:
• Put our recommendations around improving practice into action, getting ahead of regulation and showing the importance of good practice across the sector.
• Work with the government to reduce the scale of debt and arrears in each sector by introducing a range of additional forbearance and affordability measures, including social tariffs, debt matching schemes and debt write off.
• Improve communications processes to ensure people with mental health problems are supported to disclose, and that communications encourage engagement through implementing universal design and better support.
• Update guidance to bring utility providers in line with central government creditors like HMRC, who commit to only using FCA-regulated debt collection agencies.
• Require all firms to implement a pre-compliance stage to contracts with enforcement agents, to help people avoid unnecessary charges.
To protect customers from the devastating effects of disconnection from broadband and mobile services, Ofcom should:
• Implement a pre-disconnection protocol to ensure disconnection is only used as a last resort, including appropriate safeguards for vulnerable customers.
To protect customers with mental health problems from the harms associated with pre-payment meters, Ofgem should:
• Safeguard people with mental health problems through requiring firms to assess a customer’s ability to access services necessary to top up their meter when conducting a welfare visit.
HM Treasury should:
• Explore, as part of their financial inclusion strategy, the issue of disconnection from broadband and mobile services as a barrier to banking for customers who have been disconnected.
The Department for Energy Security and Net Zero should:
• Grant Ofgem the power to implement a full ban on force fitting prepayment meters.
The Ministry of Justice should:
• Amend the Taking Control (Fees) Regulations 2014 to allow for repayment plans at the compliance stage of High Court Enforcement.
Utility firms should:
• Put our recommendations around improving practice into action, getting ahead of regulation and showing the importance of good practice across the sector.
Further reading
- Connection lost: Understanding the psychological harm of utilities debt collection and disconnection
- Charity urges utilities regulators to crack down on aggressive debt collection practices - as research shows people with severe mental illness are twice as likely to be disconnected