Yahoo Finance Students warned to beware hidden costs of bill-splitting firms
For students moving into shared accommodation this month, it’s an alluring prospect: the chance to dump the headache of bills on to a friendly agent who will sign the household up to essential utilities, roll the charges into a fixed monthly sum, and then bill each housemate separately for their share.
Bill-splitting companies pledge to take the hassle out of student life, removing the stress of ensuring tenants pay their share.
However, students are being warned to beware of high tariffs, hidden fees and opaque terms and conditions. Some firms are quoting energy and broadband packages at nearly double the rate available direct from suppliers, and many are not signed up to the Energy Ombudsman, which mediates on behalf of customers when things go wrong.
These firms, which have proliferated over the last 10 years, pay to appear at the top of internet searches for “student energy deals”. Matey jargon declares they exist to allow their young customers to get on with studying and partying. “Keep your friendships friendly, and let us manage the boring stuff,” urges one. Another boasts: “We like to see ourselves as your favourite housemate.”
A few will save time and hassle for those on generous budgets. But dig down into the small print of most, and a murkier picture emerges.
The fixed monthly sum quoted is supposed to shield customers from “bill shock” if energy prices rise or fall. While a few deals include unlimited use, buried in the terms and conditions of many is the caveat that a catch-up bill will be issued if a household exceeds an annual, often unspecified, allowance of energy.
None of the websites checked by the Observer detailed how packages were costed to allow customers to compare them with other deals. Unlike energy suppliers, all quotes for gas and electricity were based on the number of residents, rather than estimated consumption.
Most include management fees, not mentioned in the sales blurb, of up to £120 a year per head, and up to £25 for payments more than seven days late.
Customers are tied into contracts of at least nine months, so, unlike those who sign up directly with a supplier, they can’t switch if they are dissatisfied, or find a cheaper deal. A charge of between £20 and £35 per tenant is levied if they leave before the minimum period, or without submitting 30 days’ written notice.
A few companies hold each student jointly liable, so, if a housemate fails to pay, the others have to cover their share, or risk a damaged credit rating.
Even savvy students might be unaware of hidden caveats because companies such as Fused and Split The Bills don’t display terms and conditions on their website.
Both state they are provided during the signing-up process. At that point, customers must have submitted their personal details, agreed to be contacted by the sales team and, in the case of Fused, created a login.
Fused says: “Our Ts&Cs differ between packages … so we don’t display them on the website to avoid misleading or misinforming anybody.”
Split The Bills was contacted for a comment.
The Observer was quoted £309 a month by bill-splitting firm, Huddle, for a nine-month gas and electricity contract in a five-bedroom house share. The homepage promises a fixed monthly share and the “best deals around”. The fact the sum would vary according to energy use is buried in the Ts&Cs. A quote from supplier Octopus was £231. Huddle was contacted for a comment.
Soaring energy prices have largely eliminated fixed-rate tariffs, but some bill-splitting firms offer a fixed price for unlimited consumption. This reduces the risk of “bill shock” at the end of a tenancy, but there’s no refund if tenants consume less.
Fused quoted the Observer £559.95 a month for unlimited energy to the same five-bedroom house. It is split into five and each tenant is billed for their share. Buried in the small print is the warning that the quoted monthly cost may rise if suppliers increase their prices, and that each student is jointly liable for unpaid bills.
Although its website states there are no management fees or “hidden costs”, it admits that it levies an unspecified “small fee” per person, per property, “proportionate to the expected consumption”. And a £25 fee may be applied to late payments.
If there’s a problem, customers may find themselves with nowhere to turn. Bill-splitting firms are not regulated by Ofgem, and only a few are signed up to the Energy Ombudsman which adjudicates unresolved complaints. Only one website we found included an official complaints process.
Last year, the Department for Business, Energy and Industrial Strategy consulted on cracking down on third-party energy intermediaries, including bill-splitting firms, after identifying potential “consumer harms”, such as opaque terms and conditions and inadequate customer services. It cited higher cancellation fees and longer notice periods than suppliers charge, and accused some companies of failing to specify how energy consumption is monitored, or when excess usage rates kick in.
According to Martyn James, of consumer website Resolver, time saved by using a bill-splitting firm may not be worth the risks. “Students need to be wary about glossy sites that suggest sharing bills is super easy, when, in fact, the businesses are often brokers who could financially benefit by finding them a deal,” he says.
“Whenever you enter into a joint agreement for things like utility bills, it makes sense to think about what might happen if one of your housemates does a moonlight flit - or simply runs out of cash. Sometimes, keeping a simple kitty, and asking the landlord to keep the bills in their name, is the simplest option.”
Other options for students
Website Save the Student advises students to steer clear of bill-splitting companies. Instead, it suggests:
• Use money-splitting apps. These are free tools to keep track of who owes what. Those such as Splitwise or SettleUp allow tenants to request payments, add comments and dates, and flag up who is overdue.
• Assign each utility. Each housemate can take responsibility for a different service, and for overseeing payments. The downside is that the individual in charge has to make the payment to the supplier, then chase their housemates for their share.
• Open a joint bank account. This will only work with housemates you know and trust. You all pay into the joint account each month and the bills are paid out of it. This saves hassle, but if one of the account holders fails to pay on time, the others could have their credit rating affected.
