PayPoint receives ‘letter before action’ correspondence

PayPoint has received ‘letters before action’  from a small number of market participants related to commitments made to Ofgem in 2021 over competition concerns. 

The pre-payment meter group came to an agreement with Ofgem in 2019 after the regulator raised concerns about a potential breach of competition laws as a result of PayPoint writing exclusivity clauses into contracts with energy suppliers and retailers.

PayPoint agreed to shake-up its services and donate £12.5million to Ofgem’s redress fund, which the regulator at the time claimed would ‘ensure that competition is not distorted’.

But the group has now received letters before action, which are the first step in a formal debt recovery process sent out by a creditor’s solicitor to inform a debtor of the intention to take legal action against them.

Correspondence: PayPoint has received ‘letter before action’ correspondence from a small number of market participants, it said

The payment system company told investors on Wednesday ‘intends to respond robustly’ to the letters, while ‘continuing to take appropriate legal advice’.

PayPoint said it had contacted its energy sector clients to waive the rights of exclusivity in its agreements.

It has also re-tendered with several of its clients in the energy sector on a non-exclusive basis.

The group provides services to energy suppliers to allow customers with pre-pay meters to top up their supply online or via PayPoint terminals in stores across the country.

PayPoint then transfers these payments to the relevant energy supplier, in exchange for a transaction fee.

When Ofgem first launched an investigation into PayPoint, back in August 2017, the watchdog examined whether the company had abused its power by writing exclusivity clauses into contracts with energy suppliers and retailers, which may have hampered competition and choice for consumers, many of whom were financially vulnerable. 

Ofgem raised concerns that PayPoint’s actions distorted competition and consumer choice in this market to the detriment of pre-payment energy customers.

PayPoint also agreed in 2019 to remove exclusivity clauses from its contracts with energy suppliers for pre-pay customers, who top up their meters using the company’s services. 

The group said the move would allow suppliers and retailers to sign up to contracts with other payment service providers and to use other providers’ equipment for processing payments for topping up energy supply. 

In November 2021, Ofgem said: ‘Ofgem believes that the commitments offered by PayPoint address its competition concerns and will ensure that competition is not distorted.

‘Ofgem has now accepted our commitments as a resolution of its concerns. PayPoint will now implement the commitments with all relevant stakeholders in a timetable agreed with Ofgem.’ 

PayPoint shares fell today and were down 1.09 per cent or 5.05p to 456.45p this morning, having fallen over 23 per cent in the past year.  

This post first appeared on Dailymail.co.uk