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Financial Consequences for UK Charities Amidst Energy Broker Controversies

With escalating gas and electricity expenses imposing financial challenges on numerous charities, a potential multi-billion-pound legal action has been launched.

Energy brokers acted as the middlemen selling to millions of UK organisations, where many added hidden commissions into energy contracts without clearly explaining it to consumers.

Misleading Practices

Legally obliged to disclose any commissions earned, many brokers made misleading statements or concealed their financial incentives, causing a significant rise in consumer bills.

Moreover, energy firms are accused of hiking bills to pay secret commissions and using lawyers to avoid telling consumers how much was paid. Such commissions, which are not detailed on energy bills, can often be reclaimed if they were not disclosed to the consumer.

Bill Hikes and Consumer Impact

A vast array of organisations, including small to medium-sized enterprises, social impact charities, schools, religious groups, care homes and local authorities have reportedly been affected by these undisclosed dealings. In some instances, consumers have witnessed bill inflations by as much as 50% over the past two decades.

Zoisa North-Bond, chief executive of Octopus Energy for Business, told This Is Money:

“About 18 months ago, while we were going through Covid, we could see brokers were capitalising on economic downfall saying they were going to bring value. The fundamental issue is that the people selling contracts are incentivised… they are pretty much unregulated [on] how much commission they can charge. They can charge pretty much what they want to charge with very little transparency.”

Energy Broker Controversies and Hidden Commissions

An energy broker typically presents themselves as assisting customers in securing an optimal energy contract from a supplier. However, consumers are often unaware that the broker receives payment from the supplier, with this fee subsequently being incorporated into their energy bill.

Astonishingly, research indicates that over 90% of organisations have utilised the services of an energy broker and on average, potential claims range from £25,000 to £50,000.

This legal challenge emerged as the Government trimmed down subsidies provided to numerous struggling entities through the Energy Bill Relief Scheme.

A representative from KWS Litigation says:

“Recognising the current financial challenges faced by charities amidst the cost-of-living crisis, we are concerned about certain brokers preying on what they perceive as less-informed organisations. Our legal endeavour seeks to assist businesses and entities in reclaiming these concealed commissions from energy suppliers and as such, we urge all charities to assess their eligibility for potential claims.”

It's estimated that approximately two million non-domestic customers are currently subjected to undisclosed charges and consequently, could be eligible for compensation.

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