By Charlotte A. McDonald, Family Paralegal, Harbottle & Lewis
£66 billion: a figure higher than the cost on the economy of crime against individuals and five times higher than the cost of fraud. Yet, this figure is what domestic violence is estimated to cost the English and Welsh economy annually, according to the UK Home Office’s “The economic and social costs of domestic abuse” research report.1 As domestic abuse is brought to the forefront of the public and political psyche, now is the perfect time to address that which negatively impacts victims financially. This article explores how banks and financial services may be unintentionally, or blindly, facilitating one of the most devastating forms of abuse, and what can be done to prevent it.
What is financial and economic abuse?
A form of abuse that occurs in nearly every case of domestic violence is restricting finances as a means of controlling victims. Economic abuse as a form of domestic violence was recognised in the Domestic Abuse Act 2021, defined in the statute as “any behaviour that has a substantial adverse effect on B’s ability to acquire, use or maintain money or other property, or obtain goods or services”.2 The introduction of the definition and recognition of economic abuse in a statute is a huge step and not only provides protection for individual victims but also awareness of this type of abuse and the impact it can have.
Economic abuse is a devastating form of abuse. It can be used in various ways and spiral into control of almost all aspects of someone’s life, causing victims to be unable to provide financially for themselves and their children and to remain within abusive relationships or return to exploitive partners. As with all forms of abuse, financial abuse occurs across all socio-economic, educational, racial and ethnic groups.
Economic abuse is an aspect of coercive control—a pattern of controlling, threatening and degrading behaviour that restricts a victim’s freedom. It is important to understand that financial abuse seldom happens in isolation: In most cases, perpetrators use other abusive behaviours to threaten and reinforce the financial abuse. Financial abuse involves a perpetrator using or misusing money, limiting and controlling their partner’s current and future actions, and curtailing their freedom of choice. It can include using credit cards without permission, putting contractual obligations in a partner’s name and gambling with family assets.
The charity Surviving Economic Abuse (SEA) has explained that financial abuse harms the victim’s wellbeing in three areas: acquiring economic resources, using economic resources and maintaining the use of resources.3 At each stage lies an opportunity for intervention or recognition from banks and financial services. A common practice is that assets are placed in the abuser’s name, and liabilities, such as bills and financial products with charges attached to them, are in the victim’s name. This causes harm and consequences on financial lives that can have lasting impacts. It is helpful to consider the short-term and long-term impacts of financial abuse separately.
In the short term, the victim may experience the stress of paying bills without adequate means to cover them, incurring interest and fees on charges and creating a spiral of debt. They may not be aware of debts, have restricted access to account information, have no opportunity to collect funds to provide for children and buy essentials, or not be able to leave the relationship due to financial reliance.
In the longer term, financial abuse can negatively impact a victim’s credit scores, savings and, in turn, ability to access alternative safe accommodations. The effects on financial positions may span many years into the future. If cut off from financial services, the victim will have no credit record to facilitate purchasing needed products and may not have the documentation necessary to open new accounts. This makes it even harder to rebuild a financial life, particularly when economic potential has been harmed—for example, by denying a victim work experience or access to qualifications. Those who have lost money in domestic abuse have to pay back debt and fund the rebuilding of the means and accommodations taken by perpetrators. This has resulted in £14.4 billion of economic-abuse-related debt in the United Kingdom.4
It is also important to recall that there is no one demographic to which financial abuse happens, so all clients should be reviewed and protected. Low income can be a factor in many cases, but it is clear that it happens across the population; abuse is about exploiting access and control, and, so, it is just as likely in a high-income household as a low-income one.
Companies, banks and financial services should consider implementing protocols for vulnerable persons; these protocols must include and acknowledge victims of financial abuse, which should also be recognised in policy and training. Those working directly with customers provide a crucial check between perpetrators and victims. The lack of follow-up or additional questioning from staff, as well as the absence of policies, can cause failures in abuse recognition.
The Refuge and the Co-operative Bank report
A report on economic abuse and banking, “Know Economic Abuse, 2020 Report”, was released by Refuge and the Co-operative Bank in 2020.4 Refuge is an organisation that provides emergency accommodation and the 24-hour National Domestic Abuse Helpline. The campaign started in 2015, aiming to shine a spotlight on economic abuse as an often-overlooked form of domestic abuse. It called for industry-wide agreement to support people who experience economic abuse in intimate-partner relationships. Only a third of people surveyed for the report had even heard of financial abuse, despite many of them being victims.
The report found that the abuse started at the beginning of the relationship for 18 percent of victims, 16 percent when couples moved in together and 8 percent when victims opened bank accounts with their partners. These points within relationships are significant as they often coincide with prominent financial steps in a couple’s life together. Once financial abuse commences, access to a bank is often restricted or stopped entirely, a joint account becomes no longer accessible, or the perpetrator gains complete control of a shared bank account.
COVID-19 and the use of technology
Financial abuse is not a new concept. However, a significant factor affecting the last two years has been COVID-19. It is hard to think of an aspect of life that the pandemic has not impacted, but it has had the particular consequence of creating an environment of financial uncertainty that has facilitated the actions of abusers and emphasised the vulnerability of survivors, according to Surviving Economic Abuse’s research.
As many are aware, due to the wide media coverage, domestic abuse as a whole increased during the lockdowns, and the COVID-19 crisis has significantly shaped the public perceptions of domestic abuse. Never before has understanding domestic exploitation been so high on public and political agendas. It is, therefore, an ideal time to address the concerns raised while awareness of this important subject is on the national psyche and plans for change.
The COVID pandemic and lockdowns have increased people’s use of technology in work and everyday life. Usage of online banking and mobile apps has increased and generated an accelerated digitalisation of payments. These apps and services have positively impacted people by giving them control of their money. However, digital banking can also be more easily abused by perpetrators. Perpetrators often take control of phones, demanding or even forcing their victims to reveal passwords. As banking includes opening and closing accounts online, there is concern that perpetrators can manipulate spending and usage. This is particularly prominent for joint accounts that can be opened but then emptied, with a partner’s money taken without their permission.
Financial abuse has increased through the escalated use of online and digital banking and within the environment of financial uncertainty, facilitating the actions of abusers. Of the professionals who responded to Surviving Economic Abuse’s survey, 41 percent reported that victim-survivors had raised concerns with them about the perpetrator taking out credit accounts or loans during the pandemic without their knowledge, and 38 percent said that victim-survivors had cited being pressured into taking out new loans or credit. Without frequent in-person banking appointments, there are fewer means to check, through human vigilance or intuition, if something is wrong or concerning. It is, therefore, necessary to consider higher-level checks and ensure that there are mechanisms through which victims can report abuse and that staff have the training to recognise potential abuse and financial manipulation.
The above-referenced “Know Economic Abuse, 2020 Report” produced by the Co-operative Bank and Refuge presents a clear plan for those in financial services to support victims of domestic abuse and prevent future maltreatment through recognition and change. Banks and other financial-services institutions should build upon the support they offer to survivors of economic abuse. Clear processes for customers who have been economically abused need to be created. Financially abused customers in debt should be able to inform their banks of their circumstances, with well-trained staff recognising abuse and supporting survivors by giving them options to reduce debt. Unfortunately, all too often, individuals do not know that they are victims of domestic abuse or what financial abuse is; consequently, it is important that information is available to educate them about economic and financial abuse. This needs to include clear processes on where and how they can report abuse, particularly when applying jointly for bank accounts or other financial products.
A key recommendation of the “Know Economic Abuse, 2020 Report” was that a code of practice for financial institutions should be developed to create a more informed, supportive and consistent response to disclosures of economic abuse in the context of intimate-partner violence. There should be help to ensure that bank practices and policies do not further disadvantage survivors or place the perpetrators of abuse in positions of power.
Once understanding and recognition exist and changes are implemented, the approach should not become passive. As further digital options are expanded, constant reviews into the protections that can be put in place should be undertaken. Reviews should be conducted regarding the impacts of digital and online services on survivors of economic abuse and create long-term recommendations for change.
Any changes that banks and financial institutions make to protect victims of economic abuse will not occur in isolation. They will be part of what will, hopefully, be a much larger change. The Co-operative Bank and Refuge report also called for credit-reference agencies to create a preferential credit-rating repair system to be implemented by both banks and credit-reference agencies. The report recommended a wider cross-government fund to assist survivors with the costs of leaving perpetrators and accessing safe accommodations. There should also be reform of welfare-benefits systems, including separate universal credit payments and grant advances for those fleeing abusive partners.
Physical safety is underpinned by economic stability. There needs to be greater recognition of coerced debt, both at banking and government levels, and mechanisms put in place to address it. At top levels, those in financial services must develop and effectively implement comprehensive and flexible policies on domestic abuse, including a sharper focus on economic-abuse protections for their customers.
Financial progress is obviously a priority, but to achieve that, more focus on individuals, both in and out of financial services, is needed. Not cutting corners with greater emphasis on identifying victims and training staff to increase and uphold integrity are steps to preventing individuals from being financially abused while ensuring that financial services are not complicit simply by not going far enough. Only by taking those steps can we protect these victims and, from a financial perspective, start to reduce that £66 billion that everyone has to pay.
1 Home Office: “The economic and social costs of domestic abuse”, Research Report 107, Rhys Oliver, Barnaby Alexander, Stephen Roe and Miriam Wlasny, January 2019.
2 Domestic Abuse Act 2021, Section 1(3)(d) and 1(4).
3 Abrdn: Financial Fairness Trust: Surviving Economic Abuse: “The Cost of Covid-19: Economic abuse throughout the pandemic. A call to build economic safety for women and girls,” April 2021.
4 The Co-operative Bank and Refuge: “Know Economic Abuse, 2020 Report,” Ellie Butt, September 2020.