It seems that when it comes to utilities and telecoms, suppliers have forgotten that ‘cash is king’. For them, direct debit is the payment option that their customers must use if they don’t want to be penalised. Recently BT announced it would be charging all customers who didn’t pay by direct debit an extra £4.05 every quarter. Mobile phone operators charge anywhere between £1 and £5 extra while companies like Sky and Tiscali do not even want you as customers if you don’t pay by direct debit.

Direct debits are popular with the large service providers because it reduces processing costs and means they can be more certain of bills being paid on time. Over 3bn direct debit payments were made in 2007 worth £883m, up 5% on 2006.

Yet for the 1.3m households who do not have bank accounts, direct debits are not an option and so they will be penalised. Many of these people are elderly or on low incomes, the penalty charges will hit them even harder. Other customers just do not like direct debits. The thought of someone else having direct access to their bank account is not welcome. Mistakes with direct debits happen with wrong amounts being taken which can take ages to be corrected. And with increasing concerns about online bank security, many people quite justifiably think the non direct debit option should remain and without penalty.

BT has 5.5m customers who do not pay by direct debit.

Many customers who have paid in cash for years and on time do not understand why they are suddenly being penalised. Others pay by electronic bank transfer or through PayPoint machines in shops both of which are quick and effective methods of payment and just as cheap for the companies as direct debits.

It is completely legal for companies to charge differently depending on the method of payment. The resentment though is about charges being made that didn’t exist before and the level of those charges. The attitude of the companies though seems to be ‘if you don’t like direct debits, don’t shop with us’.

The industry regulator Ofcom has begun investigating the matter and will present its findings later this year. Its review will look at customer awareness and attitude to the charges and whether the charges are transparent and unfair. Until Ofcom reports back there is probably little that can be done except make the companies aware of customer’s anger. The Office of Fair Trading is though taking a keen interest and will consider whether it should be involved once Ofcom have reported back.