The UK government's plan to strengthen its fight against benefit fraud by scrutinizing bank accounts of recipients has sparked controversy, with banking industry raising concerns about potential conflicts with consumer protection laws.
The UK government is facing criticism over proposed plans to tighten its grip on benefit fraud , raising concerns about potential conflicts with consumer protection laws. The Department for Work and Pensions ( DWP ) has unveiled plans to scrutinize the bank account activities of benefit recipients, initially focusing on accounts with consistent international transactions or holding more than £16,000 – the standard savings limit for Universal Credit eligibility.
The DWP aims to implement a fully automated system to detect any irregular activity in these accounts, allowing them to recover funds directly without court orders. This approach, they argue, will expedite debt recovery and bolster the fight against benefit fraud.The DWP estimates that this new system could save taxpayers around £500 million annually once fully operational. The initial testing phase will involve a 'limited number' of banks and building societies, with a gradual rollout leading to a full implementation by 2029.However, UK Finance, the representative body for British banks, has voiced strong reservations about these plans. They argue that the proposed measures could inadvertently impede efforts to protect vulnerable bank account holders and potentially clash with the Financial Conduct Authority's (FCA) consumer duty, which came into effect in 2023. This duty sets higher standards for consumer protection, requiring banks to safeguard financially vulnerable customers. Violations of these rules can result in penalties from the FCA or the financial ombudsman. UK Finance also expresses concerns about the government's plan to grant the DWP broader access to claimants' banking information, including account details like name, date of birth, and account number, but not transaction specifics. Currently, the department can only request such information in cases of suspected fraud on a case-by-case basis.Daniel Cichocki, director of economic crime and policy strategy at UK Finance, emphasizes the need for further scrutiny to ensure these plans do not create risks for vulnerable customers or conflict with existing regulatory and legal obligations. While acknowledging the importance of tackling fraud, he urges the government to implement measures that prioritize the protection of vulnerable individuals. Work and Pensions Secretary Liz Kendall maintains that the new powers will be accompanied by 'new and important safeguards,' including an annual review by an independent body to assess the use of these powers.
Benefit Fraud UK Government DWP Banks Consumer Protection Financial Conduct Authority UK Finance
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