In this case, there is a happy ending. They will receive compensation for bank charges and interest on their money.
But it is not an isolated case. Eastern Electricity is already under investigation by the regulator for unilaterally sending out quarterly bills several weeks in advance of the due date, which in the case of customers who have signed direct debit agreements is the direct equivalent of the company dipping its hands into customers' pockets and helping itself to hard-earned cash.
There are other pitfalls facing the unwary. The most common is the practice of signing direct debits for impulse subscriptions to things like discount clubs, which can sometimes run on for years, insidiously charging customers who have long since resorted to binning the product as junk mail.
But there is no doubt that, provided trust is established, direct debits do simplify the process of paying bills both for customers and for the suppliers of services, and are mutually beneficial, so long as there is a financial incentive for customers to sign them and allow money to be deducted early - to enable bills to be paid on demand instead of on receipt of the statutory threatening letter.
The volume of direct debit mandates processed has risen five-fold in the last 10 years. Some 45 per cent of all mortgage payments and 34 per cent of council tax bills are now paid this way, but only 20 per cent of gas, electricity and water bills. British Gas, however, has recruited another 1.1 million customers, weaning another 6 to 7 per cent of its customers on to direct debits by offering a really worthwhile incentive.
If it can get customers to pay, say, four weeks earlier than before four times a year it is getting the use of extra cash for16 weeks a year - worth about 2.5 per cent a year in interest. Administration savings more than justify the rest of the 5 per cent discount.
British Gas is now preparing a discount scheme for people who pay promptly but are not willing to sign a direct debit mandate. I would like to see the discount schemes extended to all forms of prompt payment, so that customers who pay their bills within, say, two weeks of receipt can automatically deduct, say, 2.5 per cent from the amount billed. It is not a new idea.
In the days before nationalisation, local utilities used to allow a discount for bills paid before the end of the month they were sent out. Some local authorities gave discounts for prompt payment of rates.
But a revolution in the way bills are paid could be achieved if incentives for prompt payment are given statutory backing.
Prompt payment discounts as of right could also be extended to accounts sent out by small businesses, who have suffered grievously during the recession from deliberate late payments by bigger customers.
All efforts to right those wrongs by giving small businesses statutory rights to charge interest on late paid bills have failed, largely because the cost of enforcing the charges would be uneconomic and the courts would collapse under the weight of work if only a small number of companies refused to pay up. Standing the problem on its head offers a simpler solution.Reuse content