22May

In its latest Ombudsman News newsletter, the Financial Ombudsman Service explained its approach to cases that involve domestic or economic abuse.

FOS defines domestic abuse as ” physical violence, …. emotional, psychological, or sexual abuse, coercive or controlling behaviour”

Within this definition, economic abuse is a form of “controlling behaviour”, and FOS considers this to include instances of one individual controlling another person’s access to money or resources such as food, clothing and other necessities. Economic abuse therefore makes the victim financially dependent on the perpetrator.

Many lenders and credit providers will be familiar with certain forms of economic abuse complaint, such as a person saying that they were forced into guaranteeing a loan or compelled to take out a loan for the benefit of someone else, or even that someone took out a loan in their name without their knowledge.

Other examples of economic abuse given by FOS include:

  • A credit card or account being used without the person’s knowledge
  • One individual stops making payments to a joint loan or mortgage, or refuses to agree to a re-mortgage at a lower rate
  • One individual forcing another to sign over policies or investments to them
  • An individual escapes an abusive relationship, but needs time and breathing space to manage their debts as a result

The newsletter then describes two recent cases upheld by FOS.

Firstly, a consumer claimed to have been forced to act as a guarantor. The firm failed to identify that the agreement for the guarantor had been sent to the borrower’s email address, or that there was someone in the background when the guarantor was speaking with the firm, coaching her as to what to say. The lender was instructed to pay the consumer compensation equivalent to all the repayments she had made, with 8% interest, and was ordered to pay additional compensation for the trouble and upset they caused.

Secondly, a consumer complained that her ex-husband had taken out a loan in her name. The reason for the loan was recorded on the application as ‘home improvements’, but the funds were used immediately to pay off a loan that was only in the ex-husband’s name. Her supposed signature on the loan application appeared different to those on her passport and driving licence. The bank was instructed to release her from the loan and refund the repayments she had made.

Scott Robert are UK compliance consultants and experts in regulatory risk.