Guidance last updated April 2020
This paper sets out Ombudsman Services’ approach to complaints relating to brokers. The aim is to aid participating companies’ understanding of how we make awards so they can consider this approach when dealing with first-tier complaints.
To provide context on brokers the paper discusses general decision-making principles and gives scenarios showing these being used.
We decided that broker related complaints were a topic worth discussing, as this area seems to be on the rise in terms of numbers and interest. We are aware that in 2019, Ofgem began the undertaking of a strategic review of the microbusiness energy markets to better understand the address the issues faced by microbusiness.
As can be seen from the graph below, an average of 11% of all business complaints during 2019 had to refer to a broker.
We would not expect to see such a high percentage of complaints relating to a third-party. For this reason, we feel it is an important topic to give some clarity on.
There are very few published tariffs for non-domestic consumers. Non-domestic consumers tend to have to contact suppliers to obtain a quotation. Some non-domestic consumers use brokers (sometimes referred to as third-party intermediaries) to find them the most appropriate tariff.
If a consumer alleges that they were mis-sold a contract by a broker, we can look at whether the sale was conducted in line with the industry rules.
If a broker had mis-sold a contract it would not be reasonable for the supplier to hold a consumer to this; therefore, although we would not hold the supplier responsible for the actions of the broker we can require the supplier to allow the consumer to leave the contract.
It can be easy to think that if a consumer is being charged the rates that were agreed during the sale, then there would not be any mis-selling. We only see a small number of broker complaints that relate to this specific description.
Most complaints relating to brokers directly link to a sales complaint. Further to this, most of these then link to an alleged mis-sell. However, sales complaints that include a broker are not often about the consumer, suggesting that the rates they agreed are different from the rates they are being charged. Most broker sales complaints relate to misleading information that the consumer claims influenced his or her decision to enter the contract. Complaints of this nature are still a complaint about entering into a contract and disputing the details given by the party that was ‘selling’ this and thus still considered a mis-selling complaint. Therefore, when we quote or reference a mis-sell or that we consider that a contract was mis-sold, this will not always mean that we are suggesting that the rates a supplier is using are different to what the broker quoted, as it can sometimes relate to other aspects of the sale that influenced the agreement.
The impact of a consumer entering into a fixed-term agreement can be significant. Often this will mean that the consumer is tied into a period and is unable to exit this until the contract comes to an end (unless there is a change of tenancy). While fixed-term contracts are reasonable, as they will offer the consumer future reassurance as to what will be charged; if this is entered into as a mis-sell or misleading information, then it might result in a negative impact.
If a consumer is incorrectly persuaded to enter into a contract, they would miss out on the opportunity to ‘shop around’. This could then result in a consumer missing out on a potentially cheaper contract. As non-domestic consumers often use more energy, the impact of this throughout a fixed-term agreement (1 year, 2 years 5 years) is magnified.
If a broker mis-sells or misleading behaviour results in a supplier having to cancel the contract, the consumer might still miss out on a contract offer that was available at the time of the original agreement. However, the further impact is attributed to the supplier, as they would have planned costs and prices based on this being a valid agreement. This could then mean a financial impact on the supplier also.
A customer’s contract comes to an end with their current supplier and they agree a 12-month contract for gas and electricity with a new supplier via a broker on 14 June 2019. The contracts are signed electronically, with the customer confirming the agreements on 17 June 2019 for electricity and 18 June 2019 for gas, respectively.
Approximately three months later, the customer receives their first invoice from the new supplier for the electricity supply only. Shortly after this, the customer receives a gas bill from their old supplier, which uses out of contract rates. The customer contacts both suppliers and it transpires that the new supplier only took over the electricity supply.
The customer is unhappy as now they have a bill on out of contract rates with one supplier when they had agreed to contract rates with another. The new supplier informs the customer that it only received a request to take over the electricity supply, so they should speak directly with the broker – the supplier did offer a new gas contract, but explained that it could not agree to the rates that were on offer three months earlier.
The broker’s process captured the electrotonically signed agreements for both gas and electricity. The broker informed the customer that how its system works is that when agreements are returned, they are processed automatically, with the broker pressing the ‘complete’ button to finalise the agreement. An issue of this system meant that once the complete button was pressed, nothing else could be finalised automatically – it transpired that the broker had completed the process upon receipt of the electricity agreement, however, the process was not completed for the gas part of the agreement.
The supplier maintained that it was not at fault and the broker advised it could do no more to help.
Ultimately, the customer has not actually done anything wrong; has followed a known common process and ended up in a financially detrimental position. Depending on the size of the business and the cost involved, this could be significantly damaging to the business.
It would not be possible for the consumer to obtain the outcome he or she would want, in terms of being charged on the new supplier’s rates for the period that it would have been had the problem not occurred. Therefore, we cannot put the consumer in the position they would have been.
We could consider it reasonable for the supplier to maintain the electricity contract. This is because although the consumer has found themselves in a potentially detrimental situation, this was not as a result of unreasonable practices by the broker.
While we would have to appreciate the situation that the consumer found themselves in, we would not be able to justify the cancellation of the electricity contract. We would expect to see the supplier look to try to help the customer in terms of seeing what it could offer in relation to the gas supply, as shown in this scenario, although this is not something we would propose as a remedy
A customer moves into a new business property; within a few days, they are contacted by a broker and agree on a contract for gas and electricity. A few days after the agreement the customer contacts the supplier to complain about the contract. The customer claims that this was mis-sold by the broker and tries to cancel, as they had found a cheaper contract elsewhere. The supplier advises that as the customer is in a fix-term agreement and there isn’t any cooling off period, it will not allow the cancellation of this.
The customer states they had received many calls from many brokers but were dealing with a specific one. Upon giving the name of this chosen broker during the conversation (with the disputed broker), the customer states that the broker on the call stated they were part of the same group – the customer says they had no reason to doubt this.
The customer advises that the broker suggested there were some issues around the meter and that it was de-energized, but if they agreed to a contract today, it could ensure they would not receive high charges. The customer claims that the broker informed them that the supplier they were trying to get them to sign up with was the cheapest currently in the market and the rates on offer would not be available after this day.
While the customer accepted that they had agreed to the rates that were being offered, they said that they would not have done so had the broker not misled them and says the nominated broker contacted the customer with a better deal.
We would want to consider the facts of the case, but also what is likely to have happened. In this case, while a sales call would demonstrate what was agreed upon, it would not show why this was agreed upon. In a case like this, it is easy to fall into the narrow thinking of ‘the consumer is being charged by the supplier for what they agreed with the broker, so there isn’t a case to consider’. In a situation such as this, the actual sales call doesn’t really add a significant amount of value, as the details of this do not support any outcome.
We would assess that the consumer raised the issue quickly after it had occurred. While this alone doesn’t confirm anything, it does support the consumer’s testimony. We would also consider that the consumer was referencing industry terminology – again this does not prove anything but does add weight to their position.
Without the complete sales call, we could not definitely say either way if the customer was or was not giving misleading information that influenced their decision to enter the agreement. However, there are a few factors that point to the notion that there might have been a mis-sell.
Lack of evidence to support one position should not result in an alternative position being supported. In this case, the consumer had presented their claim of what occurred and the evidence available and the balance of probabilities supported this more than any opposing position.
As with the previous scenario, we would not attribute blame to the supplier, as it had acted on the information received in good faith.