Finance Consumer Energy companies’ ‘dodgy’ late fees banned in crackdown

Energy companies’ ‘dodgy’ late fees banned in crackdown

Angus Taylor has announced changes to the way energy companies charge late fees.
Unfair late fees charged by energy companies will soon be a thing of the past. Photo: The New Daily
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The unfair and costly fees energy companies charge consumers for paying their bills late – sometimes by only a few hours – will be outlawed from July 1.

But other industries have been let off the hook.

The penalties are charged to consumers in the guise of a ‘pay-on-time’ discount offer, which supposedly charges consumers a lower rate for paying on time. 

But the ACCC’s 2018 review of energy prices found these “highly problematic” discounts acted more like excessive late payment fees than a proper discount. 

The competition watchdog reported the discounts were achieved in only 56 per cent of cases, meaning almost half of Australian consumers “are, in effect, paying very large late payment penalties”. 

Residential customers who miss the bill deadline could be forced to pay an additional $185 a year, while small business customers face up to $1000 in their yearly energy costs.

In response to those findings, Energy Minister Angus Taylor announced new regulations that will limit late fees and pay-on-time discount conditions to cover only the retailer’s reasonable costs.

“We are protecting consumers from dodgy retailing practices, and making sure discount deals are fair and transparent,” Mr Taylor said.

“Our focus is lower electricity prices, making sure Australian consumers get the best possible deals on their energy and ensuring retailers put their customers first.”

The new rules will apply to gas and electricity contracts entered into after the July 1 commencement date.

Dodgy discounts a corporate ‘cash cow’

Alan Kirkland, chief executive of consumer advocacy group Choice, welcomed the changes.

Mr Kirkland told The New Daily that too many consumers were being stung by late fees “dressed up as discounts” and that restricting them would save consumers hundreds of dollars.

“The energy companies went bananas with these offers because they made money in two ways,” he said.

“They were a great way to lure in new customers with the promise of a 40 per cent discount on their bill.

“But a lot of those new customers would miss the deadline, effectively paying a late fee.”

Consumer Action Law Centre chief executive Gerard Brody agreed the discounts have been “a cash cow for the industry”.

“For too long individuals and households have been whacked with these huge penalties if they’re not able to make their bill repayments on time,” Mr Brody said.

“Sometimes, 30 to 40 per cent of the total cost is added on again just because someone has paid a day late.”

The Australians being stung by these additional fees are also likely to be people already experiencing financial difficulties too.

“If someone is having financial difficulties, then of course they might be paying a little bit late,” he said. 

“I think the obligation of energy retailers as essential services providers is to assist their customers to get back on track. Charging them more is really counter to that.”

Energy companies not alone

Mr Brody said the new energy rules set “an important precedent” for other industries that still charge unreasonable fees.

Banks, gyms, and some private education providers are among the chief culprits of exploitative charges, Mr Brody said.

Some gyms, for example, charge membership cancellation fees well above the actual cost of a member’s departure.

Banks have similarly high fees for overdrawn accounts.

Mr Brody said introducing fee restrictions in the banking space could lead to tighter regulation of fees in other industries.

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