PayPoint receives “letter-before-action” correspondence

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

The prepaid meter group reached a settlement with Ofgem in 2019 after the regulator raised concerns about a possible breach of competition law as PayPoint wrote exclusivity clauses in contracts with utilities and retailers.

PayPoint agreed to improve its services and donated £12.5m to Ofgem’s recovery fund, which the regulator at the time claimed would “ensure competition is not distorted”.

But the group has now received Letters Before Action, which are the first step in a formal debt collection process sent by a creditor’s attorney to notify a debtor of an intention to take legal action against them.

The payments systems company told investors Wednesday it “intends to respond robustly to the letters while it “continues to seek appropriate legal advice.”

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

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

The group offers services to energy suppliers so that customers with prepaid meters can top up their supplies online or via PayPoint terminals in stores across the country.

PayPoint then transfers these payments to the respective energy supplier for a transaction fee.

When Ofgem first launched an investigation into PayPoint in August 2017, the regulator was investigating whether the company had abused its power by including exclusivity clauses in contracts with utilities and retailers, reducing competition and consumer choice, many of which were , could have been disabled financially at risk.

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

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

The group said the move would allow suppliers and retailers to contract with other payment processors and use other providers’ devices to process payments to top up power supplies.

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

‘Ofgem has now accepted our commitments as a solution to their concerns. PayPoint will now implement the commitments with all relevant stakeholders on a timeline agreed with Ofgem.’

PayPoint shares fell today and are down 1.09 percent or 5.05 pence this morning to 456.45 pence after falling over 23 percent over the past year.