The UK’s banks are saying planned benefit debt recovery powers are illegal, in their first public intervention over the proposals.
UK Finance, the biggest business group representing banks in this country, says the plan to take money from accounts without getting a court order would create risks for vulnerable customers, or conflict with existing regulatory and legal obligations.
It said the Financial Conduct Authority’s (FCA) consumer duty, introduced in 2023, could be in conflict with the government’s plans, as it set higher standards for consumer protection and gave banks a specific obligation to protect customers who are vulnerable due to their financial situation. A bank that breaks those rules can be penalised by the FCA, or the financial ombudsman.
There are also concerns over measures forcing banks to hand over account information of claimants who “may have been” paid benefits incorrectly – the account holder’s name, date of birth and account number, although transaction information would be excluded.
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The department can currently only demand such financial information where it has reason to suspect fraud, and only in individual cases – but argues that greater access to banking information in bulk will allow it to catch cases of potential fraud that would otherwise go undetected, saving around £500m a year once the system is fully rolled out.
Banks are said to have been quietly lobbying against the changes for more than a year – since they were first suggested by the former Conservative government. The Tories failed to get their plan passed before the general election last July, but Labour has taken it up.
The banks have gone public with their concerns after the government revealed its intention to push them through on Wednesday (January 24, 2025).
Currently, the Department for Work and Pensions can recover debt from claimants by deducting amounts from benefit payments, and it can also deduct money from claimants who are employees through the PAYE system.
The government says recovering money from claimants’ bank accounts directly would help reclaim funds from those no longer on benefits or who are self-employed, and ease pressures on the court system.
The DWP says the only accounts to be flagged at first would be those showing sustained activity abroad or holding more than £16,000, the usual savings limit for being able to claim Universal Credit. But it has not clarified what the exact threshold for handing over a claimant’s details would be.
The plan is to to compel banks to transfer over benefits debt through “direct deduction orders”. And it contains what used to be called a “double whammy”, as banks would be able to charge the claimant a fee to cover their administration costs.
The DWP would be obliged to consider three months’ worth of bank statements from the claimant first, and consider whether a deduction would mean they would suffer “hardship in meeting essential living expenses”. Experience suggests that savings-hungry civil servants would simply nod all the deductions through without caring a jot about the well-being of claimants.
The proposed legislation includes no measures to monitor claimants’ well-being, to check whether their health (physical or mental) will be harmed by deductions of alleged overpayments. Failure to do so with previous changes to benefit eligibility has led to multiple deaths, which are likely to be numbered in the thousands – or indeed hundreds of thousands.
So now the banks themselves are rebelling against the government’s plan to intrude into the privacy of benefit claimants who are paid so little that they probably have to scrabble, simply to make ends meet. This so-called Labour government has let itself down yet again.
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Banks are saying planned benefit debt recovery powers are illegal
The UK’s banks are saying planned benefit debt recovery powers are illegal, in their first public intervention over the proposals.
UK Finance, the biggest business group representing banks in this country, says the plan to take money from accounts without getting a court order would create risks for vulnerable customers, or conflict with existing regulatory and legal obligations.
It said the Financial Conduct Authority’s (FCA) consumer duty, introduced in 2023, could be in conflict with the government’s plans, as it set higher standards for consumer protection and gave banks a specific obligation to protect customers who are vulnerable due to their financial situation. A bank that breaks those rules can be penalised by the FCA, or the financial ombudsman.
There are also concerns over measures forcing banks to hand over account information of claimants who “may have been” paid benefits incorrectly – the account holder’s name, date of birth and account number, although transaction information would be excluded.
Buy Cruel Britannia in print here. Buy the Cruel Britannia ebook here. Or just click on the image!
The department can currently only demand such financial information where it has reason to suspect fraud, and only in individual cases – but argues that greater access to banking information in bulk will allow it to catch cases of potential fraud that would otherwise go undetected, saving around £500m a year once the system is fully rolled out.
Banks are said to have been quietly lobbying against the changes for more than a year – since they were first suggested by the former Conservative government. The Tories failed to get their plan passed before the general election last July, but Labour has taken it up.
The banks have gone public with their concerns after the government revealed its intention to push them through on Wednesday (January 24, 2025).
Currently, the Department for Work and Pensions can recover debt from claimants by deducting amounts from benefit payments, and it can also deduct money from claimants who are employees through the PAYE system.
The government says recovering money from claimants’ bank accounts directly would help reclaim funds from those no longer on benefits or who are self-employed, and ease pressures on the court system.
The DWP says the only accounts to be flagged at first would be those showing sustained activity abroad or holding more than £16,000, the usual savings limit for being able to claim Universal Credit. But it has not clarified what the exact threshold for handing over a claimant’s details would be.
The plan is to to compel banks to transfer over benefits debt through “direct deduction orders”. And it contains what used to be called a “double whammy”, as banks would be able to charge the claimant a fee to cover their administration costs.
The DWP would be obliged to consider three months’ worth of bank statements from the claimant first, and consider whether a deduction would mean they would suffer “hardship in meeting essential living expenses”. Experience suggests that savings-hungry civil servants would simply nod all the deductions through without caring a jot about the well-being of claimants.
The proposed legislation includes no measures to monitor claimants’ well-being, to check whether their health (physical or mental) will be harmed by deductions of alleged overpayments. Failure to do so with previous changes to benefit eligibility has led to multiple deaths, which are likely to be numbered in the thousands – or indeed hundreds of thousands.
So now the banks themselves are rebelling against the government’s plan to intrude into the privacy of benefit claimants who are paid so little that they probably have to scrabble, simply to make ends meet. This so-called Labour government has let itself down yet again.
Vox Political needs your help!
If you want to support this site
(but don’t want to give your money to advertisers)
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Be among the first to know what’s going on! Here are the ways to manage it:
1) Register with us by clicking on ‘Subscribe’ (bottom right of the home page). You can then receive notifications of every new article that is posted here.
2) Follow VP on Twitter @VoxPolitical
3) Like the Facebook page at https://www.facebook.com/VoxPolitical/
Join the Vox Political Facebook page.
4) You could even make Vox Political your homepage at http://voxpoliticalonline.com
5) Follow Vox Political writer Mike Sivier on BlueSky
6) Join the MeWe page at https://mewe.com/p-front/voxpolitical
7) Feel free to comment!
And do share with your family and friends – so they don’t miss out!
If you have appreciated this article, don’t forget to share it using the buttons at the bottom of this page. Politics is about everybody – so let’s try to get everybody involved!
Buy Vox Political books so we can continue
fighting for the facts.
Cruel Britannia is available
in either print or eBook format here:
The Livingstone Presumption is available
in either print or eBook format here:
Health Warning: Government! is now available
in either print or eBook format here:
The first collection, Strong Words and Hard Times,
is still available in either print or eBook format here:
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