Water industry regulator Ofwat has published revised guidelines for the water companies in England and Wales on dealing with household customers in debt.

Ofwat first issued guidance in April 1992 covering procedures for dealing with domestic customers in debt. Since then the guidelines have been updated several times to reflect changes in legislation.

The guidelines have now once again been updated - the 2014 version includes minor changes to reflect changes in legislation, new developments in data-sharing, changes in how Ofwat regulates information provision and the role that the Financial Conduct Authority has in regulating debt recovery  agents. It also includes minor revisions to avoid any misunderstanding of Ofwat’s views regarding companies’ use of in-house debt collection agencies.

The purpose of the guidelines is to set out how companies’ policies and procedures might best take account of customers’ needs - they are not intended to provide advice on effective debt recovery.

Ofwat said that while it is for companies to decide how revenue can be collected in the most cost-effective way, there is a balance to be struck between recovering debt, in the interest of all customers, and dealing sensitively with those customers who genuinely find themselves in financial difficulty.

With regard to application of the guidelines, the guidance document says that whilst the guidelines were initially intended to safeguard the interests of those household customers vulnerable to debt, it is generally accepted that it is difficult to define or identify these customers.

Ofwat said the guidelines should therefore be applied to all indebted household and mixed use customers in the first instance. Where a company has accurately identified that a customer will not pay rather than cannot pay, or they have information on customers’ circumstances to show why an alternative approach is more suitable, then the company is entitled to take an alternative approach provided they can clearly demonstrate their reason for departing from the guidelines.

The guidelines set out the following five principles, together with detailed guidance of how each should be applied in practice:

• Companies should be proactive in attempting to contact customers who fall into debt as early as possible and at all stages of the debt management process.
•  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.
•  All correspondence sent to customers should be written in plain language, be courteous and non-threatening but should clearly set out the action which the water company will take if the customer fails to make payment or contact the company, along with the possible consequences for the customer.
•  When agreeing payment arrangements with customers, the customer’s circumstances should be taken into account wherever possible.
• Customers whose accounts are managed by debt recovery agents or some other form of billing agent should wherever practicable receive the same level of service and care as those whose accounts remain with the water company. The potential consequences of having their debt managed by a third party should be no more severe than if the service was provided directly by the company.

Click here to download Dealing with household customers in debt – revised guidelines July 2014