Joint submission: Regulation of water retailers’ Debt Management Powers Consultation Paper

The Consumer Action Law Centre, Consumer Utilities Advocacy Centre, Victorian Council of Social Services, Community Information and Support Victoria, Uniting Care Kildonan, National Seniors Australia, the Financial and Consumer Rights Council and St Vincent de Paul Society are strongly opposed to both the imposition of interest charges on residential customers’ outstanding debts, and charges over residential customers’ property.

Interest charges are, in effect, a late payment fee and penalise those households already struggling to pay their bills. Energy companies are prohibited from charging late payment fees (affirmed in the National Energy Retail Law Victoria Bill 2012) for this very reason). The ability to charge interest on debt may also lessen the incentive for water businesses to appropriately and pro-actively assist customers experiencing payment difficulties — by providing, for example, flexible payment options and payment incentive schemes, assistance with efficiency problems, information about government concessions and grants, and, where necessary, ongoing one-one-one support — and work to minimise debt build-up.

Given that the Water Amendment (Governance and Other Reforms) Act 2012 (“Act”) has implemented those changes to the debt management powers, we want to ensure that the powers are exercised by water businesses in a way which does not disadvantage vulnerable customers, and customers who are experiencing payment difficulties. The Consultation Paper focuses on the issue of debt and the methodology for interest calculations but does not address in sufficient detail the principles to be applied for identifying customers experiencing payment difficulty or financial hardship, or discussing what should be best practice in handling the needs of such customers. The changes to the Act need to be accompanied by changes in:

  • the manner in which water businesses identify customers who are experiencing (or are vulnerable to) payment difficulty or financial hardship;
  • the sophistication of the support and advice given to such customers; and
  • the degree to which payment plans are aligned with the customer’s capacity to pay.

This is especially critical in the light of the upward trend in the incidence of financial hardship amongst household and the changing demographics of vulnerability. Rising unemployment1; utilities prices, and rents climbing much faster than both lower wages, pension and (especially) allowance payments; superannuation allocated pensions declining due to losses in the value of assets, and reductions in concessions, have all been factors in both increasing hardship among those households traditionally at risk, and bringing hardship to other households for the first time. Financial counsellors also report increasing numbers of older home owners — asset rich but, increasingly, income poor —among those unable to meet their utility bill payments and in need of assistance from utilities businesses’ hardship programs. In one water business we spoke to, of all customers in their hardship program, 60 per cent were homeowners and 38 per cent had no concession entitlement. Our concern is that at the very time when more nuanced approaches to identifying and assisting customers in hardship are needed, blunter and clumsier tools are being made available to water businesses.

The potential impact of interest charges on vulnerable customers’ risk of spiralling debt — and of charges on property on vulnerable homeowners’ asset retention, mobility, and ability to enter aged care facilities — is alarming.

To read our full submission, click here: Submission to the Essential Services Commission’s Regulation of Debt Management Powers Consultation Paper.

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