20Jun

StepChange expects ‘personal debt tsunami’

Debt advice charity StepChange is warning of a £6 billion ‘personal debt tsunami’ which can all be linked directly to the coronavirus pandemic. StepChange believes that 4.6 million UK households – around one-sixth of the total number of households – will experience severe debt problems as a result of Covid-19.

For some people, coronavirus has improved their financial situation – perhaps they might now be working from home and their income is unaffected, while their expenditure on travel, socialising and luxury spending has fallen dramatically.

Others have not been so fortunate – they might have lost their jobs or might be furloughed and receiving reduced income, or they might be newly self-employed and so don’t have recourse to the Self-Employed Income Support Scheme.

The FCA has taken unprecedented action by instructing lenders in almost every sector to grant payment holidays to affected borrowers.

StepChange’s survey suggests that, by late May 2020, each affected person had accumulated an additional £2,073 of debt on average – £1,076 in the form of arrears and £997 in new debt. These figures are expected to rise further as the health crisis continues.

It believes that, since the Covid lockdown was imposed, 1.2 million people have fallen behind on their utility bills, 820,000 people have fallen into arrears on council tax and an additional 590,000 are experiencing rent arrears. 4.2 million people have taken on some form of borrowing in order to meet expenses during this period. It adds that 70% of those affected were not in financial difficulty prior to lockdown.

StepChange also says that the debt ‘tsunami’ will hinder the UK’s economic recovery after an eye-watering drop in GDP of minus 20.4% was announced for April.

StepChange CEO Phil Andrew said:

“We were already dealing with a debt crisis, but Covid has so far added another four million people and counting to the number who are going to need help finding their way back to financial health. With £6 billion of additional household debt directly attributable to the effects of the pandemic, this is a problem that isn’t going to solve itself.

“Cost might be seen as a barrier to the recommendations we outline. However, the costs of not intervening would ultimately be higher. The misery, damage and economic drag that will inevitably follow the pandemic can and should be mitigated through public policy, and the approaches we suggest are the biggest game-changers.”

Debt advice charities are expecting demand for their services to double before the end of 2020.

The Government is to provide £37.8 million of additional funding for debt advice in England, with an additional £5.9 million to be provided to the devolved administrations in Northern Ireland, Scotland and Wales. The bad news for firms is that they will be expected to meet £14.2 million of this via an increase to the financial services (debt advice) levy they pay to the Financial Conduct Authority.

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 of the facts, circumstances or legal position may change after publication of the article.

 

19Jun

Guarantor lender reported to be facing a compensation bill of at least £35 million, following FCA investigation

Shortly after the news that one of the UK’s major non-mainstream lenders was under investigation by the Financial Conduct Authority, the lender themselves announced that the investigation could lead to it being forced to pay at least £35 million in compensation.

It is understood that the FCA has instructed the firm to process its backlog of complaints as a priority. The firm currently estimates the cost of providing redress to customers whose complaints need to be upheld as £35 million, but also warns that its total compensation bill “could be materially higher”.

The firm’s chairman will step down in the near future, a potential buyer has pulled out and the firm has indicated it is not in a position to pay a dividend to its shareholders this year.

It has been reported that the FCA is investigating the lender over its creditworthiness and affordability checks. For many of the UK’s lenders recently, it has been a case of: if the FCA doesn’t get you, the Financial Ombudsman Service will.

Some lenders do not conduct a detailed analysis of applicants’ expenditure in each area of spending. Instead, many firms use an estimate of living expenses, obtained from the Office for National Statistics. This ONS figure is merely the average expenditure that would be expected from someone living in the UK with the profile of the applicant in question. Recent FOS judgements clearly show that the independent complaints body does not agree that using ONS data to estimate expenditure is appropriate.

In most of its recent adjudications on guarantor and instalment loans, FOS has concluded that the firm should have conducted a detailed expenditure analysis and verified any expenditure data supplied by the customers by asking to see their bank statements. FOS often decide bank statements are a necessary component of ‘proportionate checks’ even when the loan amount is as low as £1,000 and/or the loan term is as short as 12 months.

Many firms also specialise in lending to consumers with an impaired credit profile, and FOS often concludes that this is another reason not to use ONS data to estimate expenses, as an applicant with a poor credit history is unlikely to be a typical ‘average’ person.

Guarantor lenders’ business models work on the basis that they lend to applicants who would not have been accepted for a loan had they not been supported by a suitable guarantor. However, it is clear that FOS does not believe that this means the checks carried out on the applicant can be any less rigorous than would have been the case had they applied for a non-guarantor loan.

Finally, in some recent adjudications, FOS has been applying a very strict interpretation of CONC 5.2A.36 in the FCA Handbook. This rule reads:

“A firm must not accept an application for credit under a regulated credit agreement where the firm knows or has reasonable cause to suspect that the customer has not been truthful in completing the application in relation to information relevant to the creditworthiness assessment.”

For example, FOS has upheld recent complaints, using this rule as its justification, where the customer’s income on their payslips was lower than they had stated in their application. FOS did not believe it was enough for the firm simply to say that it used the lower of the two-income figures in its affordability calculation.

Similarly, FOS has also upheld recent complaints on this basis where the monthly mortgage payment given by the customer in their application was lower than the payment stated in a bank statement or credit report. FOS doesn’t appear to be accepting the argument that the figure supplied by the customer could have been their personal contribution to the mortgage payment.

The FOS uphold rate for guarantor loan complaints in the 2019/20 financial year was 89%, increasing almost threefold from the previous year’s 32%.

Ombudsman decision where FOS ruled it wasn’t appropriate to use national average figures to estimate expenditure.

Ombudsman decision where FOS decided the firm hadn’t fully considered the applicant’s adverse credit history.

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 of the facts, circumstances or legal position may change after publication of the article.

Contact Scott Robert directly for further advice and information.

18Jun

Credit union report shows impact of coronavirus on household finances 

Credit reference agency TransUnion is currently publishing weekly Financial Hardship Reports, showing the impact coronavirus is having on household finances in various regions of the world.

TransUnion says that:

“The COVID-19 pandemic is creating a new reality as its impact has stretched to consumers of all generations and income levels”, and that:

“The current global COVID-19 pandemic is creating major economic and financial distress for consumers across the globe. Many jobs in the UK economy are already being impacted or at risk due to drastic demand shifts.”

The UK reported an eye-watering drop in GDP of minus 20.4% in April, and many analysts predict that the UK economy will be the worst affected global economy, given that its Covid outbreak is one of the most severe and it’s economy relies heavily on the service sector.

The latest available UK report from TransUnion, at the time of writing, included data collected in the week commencing May 25. The proportion of UK households reporting a negative impact on their finances caused by the pandemic now stands at 61%, up from 53% on May 5. 73% of under-45s are reporting a negative financial impact, up from 62% on May 5.

Of those who haven’t suffered a negative impact so far, almost half say that it is possible their finances will be impacted in the future as the crisis continues.

(All subsequent figures relate only to those who have said their finances have been negatively impacted)

Almost three-quarters (72%) are worried about their ability to pay bills. This figure has risen from 60% in the space of one month. In the Greater London area, where living costs are often higher, 75% are concerned about this, up from 65%.

When asked to name the reasons for the negative impact, 43% of respondents said their working hours had reduced. 11% said they had already lost their job as a result of the crisis, and 12% said they were self-employed and that their business had “dried up”. 22% said they had been affected because their partner’s income had reduced through reduced working hours or redundancy.

Amongst affected consumers, their average budget shortfall was £527.60. 41% are concerned that they may not be able to pay their utility bills, 34% are worried about credit card repayments and 32% say they will struggle to make their rental payments.

More than half (51%) say they have cut back on discretionary spending since the start of the health crisis, almost one-third (32%) have cancelled subscriptions or memberships and almost one-quarter (24%) have reduced the amount they are saving for retirement.

Although the FCA has taken unprecedented action by instructing lenders in almost every sector to grant payment holidays to affected borrowers, a high proportion of people said they had not contacted any lenders to discuss payment options. This applies to 43% of Gen Z, 38% of millennials, 56% of Gen X and 65% of baby boomers.

Gen Z is generally considered to be adults who are currently aged 22 or under, millennials are those aged 23 to 38, Gen X is the 39 to 54 age group and baby boomers are aged 55 to 73.

One last concerning statistic is that more than one-quarter (27%) of impacted households believe they have been subject to a potential fraud attempt since the Covid saga commenced.

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 of the facts, circumstances or legal position may change after publication of the article.

 

 

15Jun

FCA director speaks about the regulator’s Covid response

On June 4, Megan Butler – the Financial Conduct Authority’s Executive Director of Supervision (Investment, Wholesale and Specialist) – addressed the online Virtual Festival, hosted by the Personal Investment Management & Financial Advice Association.

Ms Butler said that the FCA’s main areas of supervisory focus during the coronavirus pandemic are operational resilience, financial resilience and integrity.

The FCA director said that, in general, the financial industry had responded well to the challenges posed by Covid-19. Consumer access to services had been maintained, and for most firms, their business continuity arrangements appear to be effective.

Ms Butler briefly mentioned the measures the FCA has introduced to protect borrowers, such as requiring lenders to provide payment holidays. Then she moved on to cover the regulator’s resilience requirements for firms in more depth.

The FCA’s expectations of firms regarding operational resilience include:

  • Firms must identify what their most important business services are
  • Firms must consider how much disruption they can reasonably tolerate for each important business service
  • Firms must ensure they are able to remain within their impact tolerances during severe but plausible scenarios
  • Firms should assess their continuity arrangements for important business services to identify vulnerabilities in their operational resilience and make changes where necessary

Next, she said that the FCA will be sending a financial resilience survey to firms, to allow the regulator to understand the effect coronavirus is having on firms’ financial resilience. Ms Butler conceded that some firms may exit the market altogether because of Covid-19 pressures, and said that, in these circumstances, all parties must seek to minimise any delay in the return of client money and custody assets.

The FCA director suggested that financial pressures could result in harm to customers if firms “cut corners on governance or their systems and controls”. The volatility in share prices could lead to more customers making complaints, saying they were not made aware of the risks associated with their investments.

On the subject of integrity, Ms Butler mentioned three practices which were causing concern to the FCA, and which could become more prevalent given the economic pressures caused by the health emergency. These are:

  • Phoenixing – attempting to avoid liabilities to customers by closing down the firm and starting a new one
  • Life Boating – setting up a new entity and applying for authorisation before complaints and liabilities at the original firm have crystallised
  • Leaving an advisory role and setting up a claims management company to handle mis-selling complaints about the advice that they had given in the past

The FCA director said that all of these practices would be considered to constitute a breach of the fitness and propriety requirements.

Ms Butler then observed that coronavirus had led to some firms offering mental health counselling services to advisers in another firm, and she said that, if firms offered this service, they would not be considered to have breached FCA rules on inducements.

Finally, she looked to the future of regulation, saying:

“We will capture the lessons from this emergency about delivering quickly. But we also need to look at our entire system, from the data and intelligence we collect, how we decide which firms and individuals to allow to operate and how we supervise them, to how we ensure that unacceptable firms and individuals are stopped and removed from the regulated sector as quickly as possible.

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 of the facts, circumstances or legal position may change after publication of the article

 

11Jun

Trade association issues a report on cyber resilience as new ways of working become widespread

The Personal Investment Management & Financial Advice Association (PIMFA) has warned firms about the cyber vulnerabilities they may face as a result of changes they may have made to adapt to the coronavirus outbreak.

The paper, entitled ‘Cyber Resilience in Extraordinary Times’, begins by mentioning a “momentous shift in working practices” now that so many employees of financial services firms are working from home. The principal concerns of the authors of the paper can be summarised under two headings: lack of preparation and an increase in the number of ‘endpoints.’

Firstly, the paper says that many firms were forced to purchase a number of laptop computers in a very short space of time, as many employees did not have a home computer – for many people a smartphone or a tablet is sufficient for their non-work tasks, so they don’t need a computer.

Where staff do their own computers, their security arrangements may be less stringent than those on the office PCs.

Secondly, while an office-based work environment requires firms to protect a limited number of endpoints (or even one endpoint for smaller firms with just one office), now some firms are faced with the prospect of having hundreds of remote endpoints.

Many firms record their telephone calls, but while it may be relatively easy to redirect an internal telephone to an employee’s mobile device, it is harder to ensure that these calls are recorded. Some firms have addressed this by using softphone technology, but this requires a reliable connection and a high level of IT expertise to install.

The National Cyber Security Centre says that hackers and fraudsters feed on uncertainty and fear. Not only might there be little in the way of security features on a personal laptop, but cybercriminals may see the coronavirus pandemic as an opportunity to induce individuals to do something on their computer that they would not normally do. The Centre is warning firms of a significant increase in cyber-related crime, particularly fraud and extortion.

Sensible precautions firms can take include:

  • Posting warnings about the cyber threat on their intranet pages
  • Sending emails to staff warning them of the dangers
  • Adopting a policy that the laptops can only be used for work purposes, i.e. they should not be used by the employee for personal matters, and should not be used by other members of the household
  • Issuing guidance on passwords to employees working remotely, emphasising the importance of having a strong password, such as one that mixes upper-case and lower-case letters, numbers and keyboard symbols
  • Making use of two-factor authentication, where an access code is required in addition to a password. This authentication can be installed on a laptop free of charge
  • Explaining to remote workers how they can download security updates, such as patches and anti-malware applications
  • Asking remote workers to back up their files regularly
  • Ensuring staff working at home know where to seek IT assistance and where to report any suspicious activity on their computer
  • Training staff on what they need to be aware of, such as phishing attacks, suspicious attachments etc.

Finally, the report calls on firms to consider whether their remote working arrangements are working effectively and whether the firm’s business continuity strategy needs to be updated. Firms should remember that the pandemic may usher in some longer-term changes in the way people work, so it may not be the case that everyone will be back in the office in a few months’ time. The challenges of managing remote working that firms are currently facing may become commonplace.

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 of the facts, circumstances or legal position may change after publication of the article.

 

 

10Jun

FOS annual review shows overall complaints have reduced, but uphold rates have risen in some areas

The Financial Ombudsman Service annual review for the 2019/20 financial year shows a significant decrease in the total number of complaints received, although the uphold rate has risen.

Across all product areas, FOS received 271,468 complaints between April 1, 2019, and March 31 2020, which represents a reduction of 30% on the previous year’s figure of 388,392.

Payment protection insurance complaints also decreased significantly, even though the Financial Conduct Authority’s deadline for complaints about this product occurred during the financial year. The annual total of PPI complaints received by FOS was 122,153, 32% lower than the 180,507 complaints in 2018/19.

Total complaint numbers fell by around one third or one quarter in most areas: credit card complaints showed a 23% decrease; and the reduction was 34% for current accounts, 25% for mortgages, 23% for insurance and 29% for investments and pensions.

Consumer credit complaints fell by 33%, but some credit products bucked this trend. Complaints about conditional sale products increased by 14%, while guarantor loan cases almost doubled, increasing by 97%.

2019/20 was the first year in which FOS has accepted complaints about claims management companies, and the Service took on 1,558 new cases in this area. Around two-thirds of these cases concerned PPI claims companies.

Of the 295,596 complaints resolved by FOS in 2018/19, 32% were upheld, a slight increase on the previous year’s 28%.

Some areas showed a higher uphold rate, indeed 50% of all the banking and credit complaints were decided in favour of the customer.

Six specific areas of consumer credit had very high upheld rates:

  • 70% for payday loans, compared to 53% last year
  • 73% for point-of-sale loans, up from 53%
  • 73% for instalment loans, up from 65%
  • 78% for logbook loans, showing a very large increase compared to 2018/19 uphold rate of 34%
  • 84% for a home credit, up from 39%
  • 89% for guarantor loans, increasing almost threefold from the previous year’s 32%

FOS says that many of the upheld cases were affordability complaints. On the same day that the FOS review was published, the largest guarantor lender admitted that its credit and affordability checking procedures were being investigated by the FCA.

Although new complaints about consumer credit fell by one-third, the total number of upheld credit complaints was actually larger than last year. FOS suggests that the only reason credit complaint volumes were down was that a number of short-term lenders entered administration during the financial year.

The uphold rate for CMC complaints was also above average at 42%, as was the uphold rate for financial advisers (35%).

29% of all investment and pension complaints were upheld, but FOS remains concerned about self-invested personal pensions, where the uphold rate was 52%, more than twice as large as the 24% figure for standard personal pensions.

Although it remained the most complained about product, only one in six (17%) of PPI complaints were upheld. Packaged bank accounts have also been a fertile area for CMCs in the past, but this product also had a low uphold rate of 15%.

Chief ombudsman Caroline Wayman commented:

“The fundamentals of good customer service, and good complaint handling, are constant, and the majority of financial businesses know this. However, some businesses still need to put fairness first in how they handle customer complaints.”

 

At the same time as its annual review was issued, FOS released its five-year strategy document, entitled ‘Contributing to a fairer financial world’. The three strategic priorities for FOS between now and 2025 are:

 

  • Enhancing its service
  • Preventing complaints and unfairness arising
  • Building an organisation with the capabilities it needs for the future

 

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 of the facts, circumstances or legal position may change after publication of the article.

09Jun

FCA confirms ban on contingent charging for pension transfers

The Financial Conduct Authority has confirmed that it will introduce a ban on contingent charging for pension transfers. Unless there are exceptional circumstances, advisers cannot use a fee-charging model under which they will only receive an advice fee if the transfer out of the occupational scheme goes ahead. Advisers must charge the same monetary amount for advice to transfer as for advice not to transfer.

The regulator says that the advice given by firms was suitable in 60% of the pension transfer cases it reviewed in 2018. While this is an improvement from the equivalent figure of 47% in a previous monitoring exercise, the fact that two out of every five transfer clients could have received incorrect advice has prompted the FCA to act. In the latest sample of advice files, the FCA says the advice was definitely unsuitable in 17% of cases, and that the remaining 23% of files did not contain enough evidence to justify the recommendation to transfer.

Looking specifically at clients who were advised to transfer out of the British Steel pension scheme, the FCA says that only one in five scheme members (21%) definitely received suitable advice. The advice was unclear in 32% of cases and was judged to be unsuitable for 47% of those advised to transfer.

The hope is that the ban on contingent charging will mean that unscrupulous advisers will no longer recommend a transfer simply because they can receive remuneration by doing so. The FCA was also concerned about the transparency of fee disclosure as if the fee is paid from the transferred funds, the charges may not be obvious to many consumers.

The FCA has instructed a number of firms to pay redress to clients who received unsuitable advice. The regulator’s enforcement division is also investigating 30 firms as a result of concerns identified during its pension transfer monitoring.

The new rules allow firms to use an approach known as ‘abridged advice’. For a smaller fee, the adviser could carry out a limited assessment to determine if a transfer would be in the client’s interest. The adviser would then carry out one of these steps:

  • Make a personal recommendation to the client not to transfer their pension
  • Inform the client that it is unclear whether or not they would benefit from a transfer. The adviser would then ask the client whether they wish to proceed to full advice, where a larger fee could be charged

The ‘abridged advice’ system can be used from June 15 2020. The contingent charging ban itself comes into force on October 1 this year.

The main exceptions to the ban are:

  • Clients who have a specific illness or condition that means they have a materially shortened life expectancy
  • Clients experiencing financial hardship, such as losing their home because they are unable to make the mortgage or rental payments

These customers can still be charged on a contingent basis.

In addition to the contingent charging ban, the FCA’s new rules mean that advisers will also need to consider whether it is appropriate to transfer their client’s pension pot to an available workplace pension. If the adviser recommends a transfer to a personal pension arrangement, then the file must justify why the personal pension is more suitable than the workplace pension.

 

Another new requirement is that firms must produce a one-page summary, limited to one side of A4, at the front of all transfer suitability reports. This summary must include:

  • Details of all charges, including ongoing advice charges
  • The adviser’s recommendation, i.e. whether the consumer should transfer their pension
  • A statement of the risks of the pension transfer or pension conversion
  • Details of whether any ongoing service will be provided

FCA interim chief executive Christopher Woolard said:

“The proportion of clients who have been advised to transfer out of their DB pension is unacceptably high. While much of the advice we looked at was suitable, we are still finding too many cases in which transfers were not in the client’s best interests.

“What we have set out today builds on the work we have been doing and reflects our determination to improve standards in this market. Clients need to have confidence that the advice they are receiving is right for them. The steps we are announcing today will drive up standards.”

Steve Webb, Pensions Minister in the 2010-15 coalition government, suggested that the FCA’s ban could lead some clients to opt to go ahead with a transfer, even if their adviser recommended that they should not do so.

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 of the facts, circumstances or legal position may change after publication of the article.

04Jun

Conviction secured over Covid email scam  

A man has been remanded in custody pending sentencing after he pleaded guilty to sending fraudulent text messages related to the coronavirus outbreak.

The individual sent a large number of text messages which said that they were sent by the Government and that the recipient could claim a tax refund as a result of the health emergency. However, the messages were a scam, designed to allow the man to gather the individuals’ bank account details. The messages contained a link to a website that was designed to look like an official Government webpage. The court heard that his site was “remarkably similar to UK government websites,” especially with regard to his use of logos and insignia.

The individual also passed on the consumers’ data to other scammers.

He pleaded guilty at Westminster Magistrates’ Court on Friday, May 15 to charges of fraud by false representation and possession of articles for use in fraud.

Judge Jacobs told the individual:

“You have pleaded guilty to a sophisticated fraud in which I’m perfectly satisfied you are the main player.

“What you did was to prey on the vulnerability of the majority of people in society who at this present moment are worried, petrified, fearful about their future, about their jobs, about their homes, making ends meet, getting back to work or whether they still have a job.

“Along you come, praying on those people, on anyone who might be gullible enough, and there are people sadly who would click on these scams including the elderly and others who are vulnerable because of the circumstances we find ourselves in right now.”

The investigation was carried out by the Dedicated Card and Payment Crime Unit (DCPCU), a specialist police unit funded by the banks.

Action Fraud has reported that UK consumers have suffered losses of more than £3.5 million from coronavirus-related scams since the lockdown started in late March. Trend Micro, a multinational cybersecurity and defence company, has conducted a survey which reveals that 20% of the world’s Covid-19 spam messages are sent to UK email addresses, more than any other country.

DCI Gary Robinson, head of the unit at the DCPCU, said:

“Through this investigation, we have acted swiftly to arrest and charge an individual involved in sending out fraudulent messages related to Covid-19. A large number of account details have also been recovered, helping to prevent customers from falling victim to fraud.

“The DCPCU will continue working with banks and mobile phone companies to clamp down on the criminal gangs callously seeking to exploit the Covid-19 crisis to defraud people. It is thanks to this strong collaboration between the public and private sector that we can bring these criminals to justice.”

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 of the facts, circumstances or legal position may change after publication of the article.

02Jun

MAPS explains how coronavirus has changed the work it carries out

The Money and Pensions Service (MAPS) has warned that the coronavirus outbreak could contribute to a “perfect storm” for many people who are in debt and who also have mental health problems.

Even before the current health emergency, the link between financial difficulties and mental health problems was widely understood. The reasons for this include:

  • People might forget to pay bills if they have short-term memory issues
  • An inability to concentrate means that people may struggle to read the documentation
  • Budgeting is difficult for consumers with reduced problem-solving skills
  • A consumer with anxiety issues may not want to check their bills and financial documents
  • Mental health issues can cause some people to become more impulsive, so they could make inappropriate purchases and loan applications
  • Consumers becoming unable to work due to their condition, and being unable to pay bills and loan repayments as a result
  • Addictions resulting in people spending excessive sums on their addiction and having nothing left to pay bills or make loan repayments
  • Where the condition is particularly serious, an individual may be unable to manage even essential self-care tasks, like washing and eating, and so cannot possibly hold down a job or check their financial position

Paul Farmer, chief executive of mental health charity Mind, says that 50% of people in problem debt also have a mental health problem.

Mr Farmer commented:

“Both mental and financial wellbeing have been brought to the fore by the coronavirus outbreak. For some coronavirus is having an impact on their mental health, for others, it is a difficult time financially. Many will be facing a double impact of worse mental health and financial insecurity.”

According to previous research by MAPS, around 50% of debt advisers have dealt with a consumer who has threatened to take their own life. Mr Farmer urges credit providers to consider signposting or referring clients with mental health problems to free sources of money guidance and debt advice.

MAPS reports that the number of people contacting its money guidance contact centre rose by 74% in the week following the Government’s imposition of a lockdown on March 23.

Caroline Siarkiewicz, CEO of MAPS, commented:

“In recent years, many discussions have taken place to determine how best to define vulnerability, so that services could more easily identify and support at-risk customers, such as those experiencing mental ill-health. The recent coronavirus pandemic has highlighted what our research has shown for some time: most of us are just one life event away from financial difficulty. Many of our customers in the UK are experiencing that one life event now, in the form of Covid-19.

“We know money matters and mental health are often related and that one can adversely affect the other, and what we understand so far shows that people experiencing mental ill-health have worse financial outcomes. It’s not surprising that, with a decreasing but still powerful dual stigma around the financial difficulty and mental ill-health, there are many barriers for people to overcome in getting help.”

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 of the facts, circumstances or legal position may change after publication of the article.

29May

FATF highlights how coronavirus may have increased financial crime risks

The Financial Action Task Force (FATF) – which sets international standards designed to fight money laundering and other financial crime – has issued a paper which “identifies challenges, good practices and policy responses to new money laundering and terrorist financing threats and vulnerabilities arising from the COVID-19 crisis.”

FATF says it believes that all of the following have played a part in increasing financial crime risks:

  • Many people have made greater use of online platforms, either because they are working remotely, or they have been prevented from meeting friends and family in person
  • Many businesses are now doing more business online as their retail premises have been closed by their national government
  • Some banks have restricted face-to-face banking services, which may have implications in areas such as verification of identity. Customers who have been forced to use online services when they would not normally do so may be especially vulnerable to scams
  • There has been a massive demand for items such as personal protective equipment and ventilators
  • Large scale unemployment or furloughing of workers, together with loss of government revenue and a general economic recession will undoubtedly have an impact on the financial and social behaviour of businesses and individuals
  • Many governments have prioritised fighting Covid-19 over other areas and have diverted resources from these other areas of their normal work
  • In many countries, on-site financial crime inspections have reduced or ceased altogether

The report says that the principal fraudulent activities appear to be:

  • Fraudsters impersonating government officials with a view to obtaining cash or bank account details
  • Scams relating to medical supplies, personal protective equipment and pharmaceutical products, where the criminals take payment for the goods but then either never deliver the product, or deliver goods that are substandard
  • Requesting donations for COVID-19-related fundraising campaigns, claiming that they are acting on behalf of a charity
  • Government officials misusing and misappropriating domestic and international financial aid and Covid-related emergency funding

FATF President Xiangmin Liu commented:

“The members of the FATF, both domestically and multilaterally, are applying every available resource to combat the Covid-19 pandemic. As the global standard-setter for combating money laundering and the financing of terrorism and proliferation, the FATF encourages governments to work with financial institutions and other businesses to use the flexibility built into the FATF’s risk-based approach to address the challenges posed by Covid-19 whilst remaining alert to new and emerging illicit finance risks.

“Criminals are taking advantage of the Covid-19 pandemic to carry out financial fraud and exploitation scams, including advertising and trafficking in counterfeit medicines, offering fraudulent investment opportunities, and engaging in phishing schemes that prey on virus-related fears. Malicious or fraudulent cybercrimes, fundraising for fake charities, and various medical scams targeting innocent victims are likely to increase, with criminals attempting to profit from the pandemic by exploiting people in urgent need of care and the goodwill of the general public and spreading misinformation about Covid-19.”

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 of the facts, circumstances or legal position may change after publication of the article.

 

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