Coronavirus has undoubtedly had a huge negative impact on many people’s finances, but there may also have been some positive things to come out of it regarding personal debt as well. March 2020 saw UK households pay back a record level of personal debt, perhaps because people were cutting back on discretionary spending.

March saw a total of £3.8 billion in unsecured consumer credit debt repaid to lenders and other providers, according to Bank of England data. This represents the largest net monthly repayment since 2008 and the first time unsecured household debt has fallen in eight years. Total unsecured household debt now stands at £220.9 billion, a reduction of 1.7% since the end of February 2020.

£2.4 billion of the £3.8 billion was credit card debt repayment, and it is only the second time since July 2013 when total UK credit card debt has fallen during the course of a single month. Total UK card debt now stands at £69.3 billion, which is lower than the equivalent figure at the end of March 2019, and this represents the first occasion on which the total card debt figure has been lower than it was 12 months previously since the data started to be collected in 2008.

The Bank of England has also recorded a fall in year-on-year credit card spending for the first time, with its figures showing a 0.3% drop in spending on credit cards in March 2020 compared to March 2019.

Meanwhile, new consumer lending fell by £5.4 billion during March.

The current health emergency does of course mean that people cannot spend money on many of the things for which they might normally take out credit, or it’s harder to purchase certain big-ticket items, for example:

  • A holiday – the Government is still advising against all but essential travel to all other areas of the world, and all UK hotels and other holiday accommodation remain closed for holiday purposes
  • A car – car showrooms remain closed
  • A wedding – all UK weddings are cancelled with no indication of when they can resume
  • Home improvements – internal building work in an occupied property isn’t currently permitted

Andrew Hagger, the founder of personal finance site Moneycomms, said:

“The cut back in spending is astonishing but a combination of people being extra careful with their money and unable to spend on big ticket items such as cars and holidays has seen borrowing levels slump.”

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article

How might firms verify client ID if they can’t meet face-to-face?

The current UK Government lockdown restrictions are unambiguous – face-to-face meetings with people outside of your own household are only permitted in certain limited circumstances, and these circumstances certainly don’t include meeting clients to conduct financial services business.

However, the Financial Conduct Authority remains equally unambiguous in saying firms cannot use coronavirus as an excuse for failing to verify the identity of their clients. The Money Laundering Regulations 2017 continue to apply, and some firms remain subject to detailed FCA anti-money laundering rules, while other lower risk firms are still subject to high-level requirements to reduce the risks of financial crime occurring.

In its Dear CEO letter of March 31 2020, this was one of the topics the FCA covered, under the heading “Client identify verification needs to continue, but firms have flexibility within our rules”

It must be remembered, of course, that many firms operate online, or operate other business models that mean they never meet clients face-to-face, so these firms will be used to the idea of verifying client identity without meeting them. Some firms have purchased tried and trusted electronic identity verification systems that search various public databases and then tell the firm if they can be satisfied that their client is indeed who they are claiming to be.

The suggested methods of verifying identity listed in the recent FCA letter are:

  • Accepting scanned documentation sent by e-mail, preferably as a PDF
  • Seeking third party verification of identity to corroborate that provided by the client, such as from the client’s lawyer, accountant, doctor, minister of religion or other responsible person who knows the client well
  • Asking clients to submit ‘selfies’ or videos – frequently these would show the client’s face and would also show them holding their passport or other identity document
  • Placing reliance on due diligence carried out by others, such as the client’s primary bank account provider, where appropriate agreements are in place to provide access to data
  • Using commercial providers who triangulate data sources to verify documentation provided
  • Gathering and analysing additional data to triangulate the evidence provided by the client, such as geolocation, IP addresses, verifiable phone numbers
  • Verifying phone numbers, e-mails and/or physical addresses by sending codes to the client’s address to validate access to accounts
  • Seeking additional verification once restrictions on movement are lifted for the relevant client group – although this last method may have one obvious drawback, which is ‘exactly how long will it be before the lockdown is relaxed sufficiently to allow face-to-face client meetings once more?’

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article