By Alex Garioch
April 25, 2025
Major lenders are starting to set aside cash in anticipation of potential payouts to millions of drivers for mis-sold car finance products, with experts estimating that the bill could reach several billion pounds. But, much like the PPI scandal that came before the PCP (Personal Contract Purchase) issue was revealed, this isn’t the only instance where dishonest broker practices have been uncovered.
Many businesses with commercial office spaces, shops or warehouses are likely to have been engaged in historic energy contracts with hidden commission fees, which should have been disclosed. In contrast to consumers who usually shop around via comparison sites or go directly to energy suppliers, Ofgem reports that around one-third of businesses arrange contracts via a third party. Up to 3,000 brokers operate in the UK’s non-domestic energy market, which was deregulated in 2000.
In theory, businesses had put their trust in an expert to find the best deal for them. However, in practice, this may have come at a price, with hidden commission benefitting both the brokers and the energy companies through inflated tariffs and increased contract lengths pushed by the brokers responsible for the deals.
The basis of the legal case is similar to the PCP scenario; the hidden commission is viewed as a bribe, and a remedy can be sought from the briber – in this instance, the energy companies. The full extent of the issue is yet to be fully understood, but with deals dating back two decades and potential claims of up to £20,000 per business, the impact could be significant.
Of course, not all brokers were involved in these types of contracts, but concerns prompted new rules to be introduced in 2022. It is now mandatory for suppliers to be much clearer about what fees are passed on to customers.
The lack of informed consent is the real problem here. Even if there was wording around commission in the contract, courts have since ruled that this did not go far enough to imply informed consent, and full details should have been included.
Last December, the Energy Ombudsman introduced a framework to support small businesses to help make sense of potential claims and, where possible, avoid complex court proceedings. It covers firms with fewer than 50 employees and an annual turnover of less than £6.5 million – meaning the majority of Scottish businesses will fall under this umbrella.
Importantly, it is not just private businesses potentially affected. Charities, public sector organisations and community groups with a physical space may also have been given these kinds of deals, ending up paying more than was required.
The fact that this framework already exists highlights the potential scale of the issue, but the process of gathering the necessary evidence, interpreting recommendations and negotiating refunds from the energy companies could be a significant burden on a small business. If you think you may have been involved in this kind of contract via a broker, consider seeking legal advice to relieve some of the pressure.
Every aspect of this case highlights the need for commercial contracts to be crystal clear. While brokers’ exploitation of loopholes could result in billions of pounds in compensation, it may also have widespread impacts for the entire energy market, just like the impact of PPI and PCP on financial services.
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| Cat McGarrell Associate, Litigation | ||||
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As featured on Edinburgh Chambers of Commerce
