Whats The Difference Between Level 1 & Level 2 Letter of Authority

Man Signing Contract

The Simple Explanation

Level 1 – The third party becomes your consultant, they do all the legwork, explain everything to you and you sign.

Level 2 – The third party become your deputy director and have all the power you have, they can agree contracts without your authorisation. You as the director can revoke the power at any time.

letter of authority hamed adefuwa

Interested In More Detail?

Talking about the differences in levels of authority is difficult but necessary. There are officially two types of letter of authority’s; level one & level two. Level one allows the third party mentioned in the document to request basic nonsensitive information from your current supplier, your contract end date, your usage and things similar to that. Level two permits the third party to sign new contracts on your behalf and change your billing address from your address to theirs. These are supposedly the two levels of authority you can grant but in reality, the lines are far more blurred than that.

Most brokers will add what they consider necessary to the letter. If a broker wants to sign you up quickly they’ll add only to request current contract information and to be able to terminate your current supply to the letter. This allows them to get you accurate prices and then switch/renew you as you please.

If however the broker, wishes to keep your business for a few years they’ll usually add things into the letter like, the permission to handle objections, change business information and even handle new contracts without the need for a signature.

Actions Available on Most LOA’s

  • Submit notice of termination
  • Request recent bills
  • Request current and renewal prices
  • Request terms and condition of supply

Warning

Signing a letter of authority without reading it is careless of you as a business owner or someone who’s been entrusted to look after this side of the business so please take five minutes to read things before you sign.

Beware of documents entitled “Level 1 Letter of Authority” when in actuality it’s a level 2. Don’t be duped – read the document and if you can, avoid signing them unless you genuinely are busy.