Until 1 October 2023, Direct Debits were calculated by summing the projected cost over the next 12 months or to the end of a fixed-term contract, subtracting the current balance and dividing the result by the number of DDs remaining.
A change was then made which involved calculating the DD required to bring the balance to zero on the following 31 March, the end of the winter semester. This was not popular:
- those in debt found that there were fewer months left in which to pay off the debt, meaning that the DD had to rise accordingly.
- those in credit were advised to reduce their DD to meet the new target. This would inevitably lead to a mandatory increase from 1 April.
On 1 November last, the system changed again. Now, customers on both variable-rate and fixed-rate tariffs find that their DDs have to change in order to return the account balance to zero by 31 March 2026, 17 months ahead. This is advantageous for those in debt, with now 12 more months than before in which to pay off the debt. For those in credit, it means maintaining an unnecessarily high balance for a whole year.
Requiring a balance of more than one month’s projected costs at the end of a fixed term contract is unreasonable. Furthermore, Ofgem say that:
| Where a consumer is in a credit position, we expect suppliers to reduce the associated Direct Debit level with the intention of returning the account as close to a zero balance over the next 12 months. -- Direct Debit Market Compliance Review: Progress Update | Ofgem |
Please will OVO consider revising the way DDs are calculated in order to meet Ofgem’s expectation?