Review of Guidelines for
Dealing with Household
Customers in Debt
An Ofwat consultation
CCWater response January 2007
OFWAT: REVIEW OF GUIDELINES FOR DEALING WITH
HOUSEHOLD CUSTOMERS IN DEBT
1. The Consumer Council for Water provides a strong and independent voice
representing the views and interests of all water and sewerage consumers in
England and Wales. We operate through nine regional committees in England
and one in Wales.
2. We welcome Ofwat’s review of its ‘Guidelines on dealing with customers
in debt’. We had the opportunity to contribute to pre consultation discussions
and to attend the workshop arranged by Ofwat earlier in the year. This provided
a useful discussion forum for stakeholders to aid the development of proposals
for revision of the guidelines in advance of the publication of the consultation.
3. Household debt is reported to be higher per capita in Britain than in any
other European country. It is not surprising that the debt levels of customers
within the water industry have risen over recent years with household debt for
water and sewerage services (more than 3 months old) increasing in 2005 - from
£760m to £814m and reportedly adding £11 to each customer’s annual bill. This
includes the costs of collection, ‘write-off’ and interest costs where revenue is not
recovered. Amongst those customers who are paying bills and subsidising debtors
there are inevitably those who will themselves be struggling to meet their
commitments but continuing to do so.
4. Water companies can no longer disconnect domestic households for non
payment of water charges. They have had to get to know their customer base
better and refine their collection methods to take account of this. Although
initially there was a lack of awareness amongst the general public of the inability of
companies to disconnect this information is becoming more widely known.
5. Research carried out in 2003 ‘Paying for Water’ on behalf of WaterVoice,
predecessor to the Consumer Council for Water, reported that customers with
water debt in the main divide into three groups
‘can’t pays’ - those genuinely struggling financially
‘ won’t pays’ - those who take the line ‘Why should I pay’ and
poor money managers – in the main those who did have sufficient financial
resources but did not manage them effectively (Can’t cope). Some people
who are genuinely struggling ‘can’t pays’ also fall into this category.
6. Follow up research conducted by UKWIR in 2004, ‘Water Industry Debt –
Minimising the Problem of Non Payers’ confirmed this categorisation and refined it
Strugglers including those distressed and vulnerable
Defiant debtors or calculating debtors
Poor Money managers – unaware and denying debtors
7. Affordability of water and sewerage services has been identified as being
likely to be a more pressing issue where water costs are highest as a proportion of
income, noting that the proportion could rise towards 7% for low income
households in some regions. Government does not propose to match the scheme
introduced in Northern Ireland which caps water charges at 3% of income, and
there is no equivalent to winter fuel payments to assist pensioners with water
costs. Although there is undoubtedly a group of ‘won't pay’ customers, who
simply find that their water bills are relatively easy to avoid without consequences,
there are also ‘can’t pays’ and groups who do pay but with considerable difficulty.
8. Water consumers on low incomes – those who struggle but maintain their
payments - are therefore suffering a complex and interlinked set of downsides
from policy approaches to water affordability and associated debt issues;
there is limited help with bills through the benefits system;
such help as is available for vulnerable groups is linked to average household
charges, its value to those assisted therefore declines as average household bills
the cost of rising debt as water bills become unsupportable for low income
households is ultimately paid for by other paying customers, including those
who are struggling to pay;
water customers tend to be paying not just for the cost of the service they
receive, but for some of the social cost of rising debt and the cost of an
extensive programme of public goods in the form of environmental
improvements from which they may not directly benefit;
the impact of this environmental burden is not graduated in relation to
household income or expenditure, as it would be if it were supported through
taxation. In many regions, depending on tariff structure, it falls as a flat rate
addition to bills.
General Comments on the Guidelines
9. We support the review of debt guidelines subject to the following
comments but we urge all stakeholders not to lose sight of the interacting factors
that are driving debt and the distributed cost of debt upwards. Companies can do
only a limited amount to control them, and decisive intervention is in the end a
matter for Government.
10. We welcome the fact that the guidelines continue to provide for individual
company flexibility which will allow companies to maximise the available options
including segmentation and targeting, in determining a customer’s status and then
pursuing an appropriate and sensitive, course of action. We are also working with
Water UK to identify strategies for companies to adopt to encourage the ‘poor
money managers’ and those who can pay but don’t, to pay their water bills and
avoid falling into debt.
11. In addition to contacting customers who are not making payments,
companies should consider making regular contact with past debtors who have set
up, and are adhering to, regular payment plans. It would be positive and
encouraging for customers to see their debts getting smaller. Furthermore,
customers in debt are likely to have multiple creditors, all competing for
precedence, and these reminders would keep the water debt in focus.
12. Paragraph 1.4 in the Ofwat Consultation document states that ‘Companies
are accountable for their own decisions in the way they choose to manage their
business and it is for them to decide the most cost-effective way to collect
revenue’ It appears that water companies are not subject to the Consumer Credit
Act (CCA) or the OFT guidelines on the collection of debt, and therefore their
behaviour in pursuing debt is not subject to the same rules as other companies
around harassment of debtors. The guidelines should also include a requirement
that commitment to the CCA and the OFT guidelines should be evident in
companies’ codes of practice and in debt management procedures to ensure
customers have some redress if they believe a company is harassing them for
recovery of a debt.
13. The consultation document states that “following the consultation we may
also make some further small changes to the guidelines to update the style and
layout”. We consider that the amendments to the guidelines identified by this
review, although relatively minor, may necessitate a wider than proposed change
to ensure that the guidelines are clear, unambiguous and well drafted whilst
14. Whilst such things are inevitably subjective CCWater is considering
creating a good practice register in the area of debt recovery. Effective,
appropriate debt recovery procedures are important to all water bill receivers: the
do pays, can’t pays and won’t pays.
1. Do you agree with the proposals set out in chapter 3 on the
Local authority arrangements (See section 3.1 – proposed words
added to recommend that companies should take care when making
agreements with local authorities (LAs) to ensure that LA billed
customers are treated fairly.) We would welcome evidence on
whether eviction of customers by LAs purely for the non-payment of
water bills is a significant problem in practice before making a
decision on whether guidance on this issue should be added to the
15. It is accepted that local authority or housing association agreements can
have advantages for both customers and companies in that water charges are
collected alongside customers’ rent, providing them with an opportunity to budget
and a regular income for companies.
16. There are however significant disadvantages for both in that there is no
direct relationship between the company and the customer. It can be difficult for
CCWater to gain an understanding of the needs of this section of the customer
base. In Wales especially this is of considerable concern as a large proportion of
the customer base has its charges collected by Local Authorities.
17. From the companies’ perspective this gap in knowledge could have an
effect in the future if former occupants of local authority or housing association
properties become private sector tenants or owner/occupiers. As there is no
established payment culture between the company and the customer there is an
increase in the risk of a failure to establish a payment culture at the new premises.
18. It is also more difficult to ensure that customers in debt are made aware of
the free meter option and the possibility that there are potential savings to be
made by its use. The availability of the Vulnerable Groups Tariff, the third party
deduction scheme–Water Direct-, flexibility of payment arrangements, Direct
Debit discounts, Surface Water Drainage Rebates and water efficiency
information are all options which are likely to be denied to customers whose water
and sewerage charges are collected at the same time as the rent. Companies should
be encouraged to build communication channels with these customers.
19. There are also difficulties experienced by these customers in ascertaining
how charges have been calculated. We therefore strongly support the addition of
the words added at principle 5 expectation 9 in the guidelines. We would like to
see this strengthened to ensure that indebted customers whose charges are
collected by third parties are made aware of the additional options available to
them, as detailed above, and that they are not in any sense disadvantaged in
comparison to any other category of customer.
20. There is a limited amount of information available from the CCWater
Committees about eviction, or threat of eviction, by Local Authorities for non
payment of water bills. This limited information could be a reflection of the
isolated nature of customers whose charges are collected by Local Authorities and
we suggest that Citizens Advice should be approached to provide further evidence
to assist in determining whether this is a problem.
21. Despite the lack of available evidence there is however a significant risk to
these customers in the threat of eviction due to non payment of water and
sewerage charges. There is a growing emphasis by Local Authorities on
outsourcing, and water companies should ensure that they have an appropriate
measure of control should a Local Authority, or indeed a Housing Association,
transfer the actual collection of charges from a direct collection arrangement to an
22. We recommend that the guidelines encourage all companies to involve
CCWater committees in both the agreement of terms and conditions of any
potential schemes whilst they are being negotiated and the production of a leaflet
for customers whose charges are collected by Local Authorities detailing the
vulnerable groups’ scheme, meter option etc.
23. CCWater may, in the future consider undertaking a detailed review of the
relationship between Local Authorities/Housing Associations, water companies
and their customers.
Third party debt sale (section 3.2) – proposed words added to
recommend that any third party debt agents used when selling debt
are selected with care
24. We accept that Ofwat does not have any power to prevent or restrict an
undertaker from selling unrecovered debt to a third party. However such an
action should be actively discouraged by Ofwat and should be used by companies
as a last resort measure, only after the normal debt recovery procedures have been
fully exhausted. In addition it is difficult for companies to establish a relationship
with a customer to recover the current year’s charges if older debt is concurrently
being chased by a third party debt recovery company. It is essential that
companies expect third party debt recovery agents to operate in accordance with
their own Code of Practice on debt recovery.
Void/unoccupied property notices (section 3.3) – proposed words
added to clarify when such notices should be used
25. We agree that void notices should not be used to threaten disconnection of
household customers in order to prompt payment or contact where customers are
believed to be in residence. Clarification of the wording under this principle is
suggested as ‘Notification of disconnection through void property notices should
only be used where the company can demonstrate that it has made reasonable
attempts, including a visual inspection, to ascertain that the property is in fact
unoccupied, before the issue of a notice. Void property notices are not a
mechanism for managing debt.’
26. We recognise that void property notices are a very efficient method of
prompting a customer contact. To prevent abuse of this procedure companies
should be asked to report upon the number of void property notices that they
issue each year and how many properties are actually cut off as a result thereof.
Commercial customers (setion3.4) – proposed words added to clarify
which customer groups the guidelines apply to
27. Title page - Addition of ‘Household’ to the title – CCWater recognises the
differences experienced by companies in collecting debt from household
customers as compared with commercial customers, whose supply can still be
28. Notwithstanding this there are many small and medium size businesses and
charities who may also struggle to pay their bills and it is in the interests of
companies to maintain contact, encourage dialogue and deal sensitively with these
customers, in a similar way to that adopted for domestic customers, to maintain a
culture of payment. Ultimately it is not in either party’s long term interests for
businesses to have to cease trading when the water supply is disconnected with a
resultant effect on local economies and communities. Words to this effect should
be added to the guidelines and to maintain flexibility in approach ‘Household’
should be removed from the title.
29. It is important that mixed use premises, where part of the property is
occupied as someone’s sole home, are not treated as commercial premises or the
occupants threatened with disconnection, or indeed disconnected. There is
concern that workers occupying premises as part of their conditions of
employment could be disconnected when the employer of the business fails to
make the necessary payments.
30. Regardless of whom the bill payer is it is important to ensure, for reasons
of health and humanity, that supplies are maintained and debt recovery action is in
accordance with the guidelines. The guidelines should be amended to reflect this
view and an explanation should be provided in the guidelines to the effect that any
customer, including those living in mixed use premises, is covered by the
Third party deduction scheme (Water Direct) (section 3.5) –
proposed words added to reflect current use of the scheme.
31. We are continuing to lobby for changes to this scheme to extend its scope
but agree that in the interim companies should be encouraged to maximise the
potential number of eligible participants by being pro-active in making the scheme
available and promoting its availability.
32. CCWater is uncomfortable with the ability of companies to use the Water
Direct scheme for their customers without their consent and inform them
accordingly afterwards. In an employment situation, an attachment of earnings
order could only be made by the Court, and employers cannot make deductions
from wages without notification to the employee – in comparison this appears to
be excessively onerous treatment of those on income related benefits. There
should be an expectation that the company has made every effort, in a timely
manner, to contact the customer and request their agreement to go onto the
scheme before it approaches DWP to set it up.
Debt management companies (section3.6) - propose that no words
are added due to the preference to refer to non-fee charging agencies
such as Citizen’s Advice.
33. Customers should not be advised to contact fee paying debt management
companies but proactively encouraged to contact organisations that offer debt
management services without a charge. Any customers advising water companies
of their intention to approach a fee paying company should also be advised of the
existence of similar services which do not incur a charge. Water companies should
not promote the services of fee paying debt management companies. Specific
reference should be included in the guidelines to this effect.
2. Do you agree with the additional amendments to the guidelines
shown as track changes in appendix 1? If you do not agree, please explain
why not and propose alternative words if appropriate.
Principle 1: – Companies should be proactive in attempting to contact customers who fall into
34. We accept that removal from the guidelines of the suggested reasonable
period of 21 days for the issue of a reminder and a ‘minimum’ of 14 days will
provide opportunities for companies to be totally flexible in the timescales
between the issue of bills and the subsequent reminders. However any timetables
adopted by companies should continue to reflect reasonable periods which do not
increase the difficulties customers face when reminders are received for payments
which have been made. We consider that best practice would be to retain the
reasonable period of 21 days and the minimum period of 14 days.
35. It is important that sufficient time is allowed between bills and reminders
for any payments to be processed and recorded in companies’ reminder systems.
Inaccurate reminders cause distress, confusion and disruption of payment cycles,
especially to customers who are paying small amounts on a frequent basis.
CCWater believes that the previous timescales were flexible and should be
36. We are also aware that quite often bulk mailings of reminders by
companies cause problems for all, companies and customers, when insufficient
resources are available to deal with the resulting contact from customers. This
difficulty should be acknowledged in the guidelines.
37. Consideration should be given to including an expectation that companies
have sufficient resources available to deal with any contacts as a result of outgoing
bulk debt related mailings. It is possible that customers may call the company
only once to advise of any difficulties, or even to make a payment and, in the
interests of all, any such contact must be captured.
38. Expectation 2. The wording regarding 21 and 14 days should be retained as
39. Expectation 4. Companies must document each effort that has been made
to contact the customer (including telephone calls and visits where contact was
40. Expectation 10. The requirement to make repeated efforts to contact
customers should be qualified by the addition of words requiring companies to
adhere to the requirements of the CCA and the OFT guidance with regard to debt
recovery in addition to the other expectations detailed in the guidelines
Principle 2:-Companies should provide a reasonable range of payment frequencies and methods,
for all customers. The entire range of options should be properly and widely advertised to ensure
that customers can select the arrangement which best suits their circumstances.
41. We accept the proposed amendments without the need for any additions
42. Expectation 7. The guidelines should refer to the need for companies to
make it clear to customers which payment methods are free and which attract a
Principle 3:-All correspondence sent to customers should be written in non threatening style but
should clearly set out the action which the water company will take if the customer fails to make
payment or contact the company.
43. Current Practice No comments
44. Expectation 1. This should state that the extract from the code of practice
that covers “what to do if you are having difficulty paying your bill” should be
sent to customers at every stage of the account in arrears cycle.
45. Expectation 3. With the technology available, companies have no reason to
issue a letter which can apply to both domestic and commercial customers.
CCWater would prefer to eliminate the possibility of companies using such a letter
as a 'veiled threat of disconnection' by adding an expectation to the guidelines that
companies do not issue letters which can apply to each group but have specific
46. Words have been added to give guidance when using void property
notices. For additional clarity we suggest rephrasing ‘Notification of
disconnection through void property notices should only be used where the
company can demonstrate that it has made reasonable attempts to ascertain that
the property is in fact unoccupied before the issue of a notice. Void property
notices are not a mechanism for managing debt.
Principle 4:- When agreeing payment arrangements with customers in debt, the customer’s ability
to pay should be taken into account.
47. It is advisable for customers who are experiencing payment problems to
receive independent advice about a reasonable and sustainable level of payment
relative to their income. It is important that customers are advised of contact
details for a trained debt advisor either nationally through Citizens Advice or the
National Debtline or locally through specialist agencies whenever payment
amounts and frequencies are under discussion.
48. When dealing with customers who state that they do not wish to follow
that course of action companies should then follow the guidance provided by
Ofwat. We suggest that the final paragraph of Principle 4 ‘Where the customer
has multiple debts…’ is repositioned to the end of paragraph 3. In addition
appropriate wording needs to be added which advises that ‘any information
provided will not be divulged to any other person or used for any other purpose’.
49. Expectations 2, paragraph 2 We suggest for clarity that this is replaced by
'Companies should be able to demonstrate that consideration has been given
to whether the customer would benefit from:
the installation of a meter;
water efficiency measures and that, where relevant, information has been
provided about this ;
the vulnerable groups’ tariff or any other company specific tariff, for
example a low user tariff.
This will provide additional clarity and protection for customers.
Principle 5: Customers whose accounts are managed by debt recovery agents, or some other form
of billing agent should receive the same level of service and care to those whose accounts remain
within the water company.
50. In addition to debt recovery agents companies also employ tracing agents
to identify customers who have moved from their original address. These agents
might not be interpreted by companies as either ‘billing or debt recovery agents’
however it is important that these agents deliver the same standard of service to
customers as if they were dealing directly with the company. This principle and
current practice should reflect the fact that it covers all agents making customer
contact in respect of outstanding accounts.
51. In the first sentence after ‘Expectations’ it would be helpful to add ‘or
some other form of billing agent’ after ‘debt collection agents’. In addition these
expectations should be strengthened by the omission of the word ‘generally' from
52. Expectation 1 We suggest replacing ‘to be aware’ with ‘the agent must
operate under the same Code of Practice on Debt Recovery’.
53. Expectation 2 We would prefer this to read: ‘To be able to verify on a
54. Expectation 3 Where a customers' debt has been sold to a debt collection
agent, the water company should always make the customer aware of this and
also the fact that the water company no longer has control of this debt. This
expectation should reflect this.
55. Expectation 5 The additional text proposed is a separate issue to the rest of
the text here. The issue of customers requiring special assistance is not just an
addition to an unrelated matter and this point should therefore be listed as a
56. Expectation 7 We think ‘where possible’ should be deleted from the third
57. Expectation 9 All companies should involve CCWater committees in both
the agreement of terms and conditions of any potential schemes whilst they are
being negotiated and the production of a leaflet for customers whose charges are
collected by Local Authorities detailing the vulnerable group’s scheme, meter
option, water efficiency etc.
3. Should the guidelines be applied to all indebted customers or
focused only on ‘vulnerable’ indebted customers (section 4)? If the latter,
please set out any ideas on how such customers could be distinguished.
58. We are not aware of any absolute definitive method of identifying the
‘vulnerable’ indebted customer and it is therefore essential that these guidelines
are applied to all indebted customers.
59. Water companies tell us that it is difficult to identify ‘vulnerable’ indebted
customers; although they are implementing systems which make it more likely that
they are able to do so. However the classifications resulting from these systems
can be revealed at varying stages of the debt recovery process, not necessarily at
the outset so the guidelines should be applied to all indebted customers so that
they all receive the same level of service according to their needs as they are
known at any particular time.
CCWater has statutory duties to represent the interests of customers of
the water and sewerage companies in England and Wales. We operate
through nine committees in England and a committee for Wales.
Enquiries about this response and requests for further information
should be addressed to:
Consumer Council for Water
St Augustine’s Way
Tel: 01325 464 222 Fax: 01325 369 269