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This article is the latest part of the FT’s Financial Literacy and Inclusion Campaign
The impact of financial crimes goes well beyond the monetary shock for those affected, according to a new study which calls for a regulatory overhaul and better support for the victims.
The report, released on Thursday by Transparency Task Force, a social enterprise group which campaigns for greater transparency in financial services, also warns that the regulatory framework for the sector is failing.
“We found the victims’ experiences adversely affected all areas of their lives, with devastating financial, wellbeing, social, emotional and support-related impacts,” the report says.
“The severity and extent of those impacts are particularly highlighted by the themes of stigma, depression, anxiety, suicide and social withdrawal; but even these alone do not paint the full picture.”
The report is based on 25 in-depth interviews with people affected by a range of financial issues. These included banks mis-selling products such as payment protection insurance, scams involving fraudulent investment products and the cases of mortgage prisoners, customers who are trapped paying higher rates than the rest of the market.
The impact on their wellbeing ranged from a lack of self-esteem and distrust of authorities to social withdrawal and even suicidal thoughts. Victims often found support informally through online communities or campaigning.
More than 32.4mn complaints were made about PPI, an insurance product that banks sold to personal loan and credit card customers in the 1990s and early 2000s, with many lenders selling it to borrowers who were ineligible to claim or unaware they were making extra payments to buy one.
Lenders cumulatively set aside £50bn to fund compensation. On average, 87 per cent of complaints involving PPI were upheld, with a redress payment of £2,000.
“Financial fraud is a blight on our economy, on our society and on our country. But financial fraud and malpractice also has a huge human cost. As this paper shows, it destroys innocent people’s lives,” said David Pitt-Watson, a fellow at Cambridge university’s Judge Business School.
“This is a profoundly serious problem in plain sight, an ugly elephant in the room. We can and must do so much better.”
The UK currently faces an “epidemic of fraud,” according to banking industry trade body UK Finance. This includes a surge in scams in which victims are tricked into sending cash to fraudsters who impersonate figures of authority, such as bank staff and police officers.
Investment scams caused the greatest losses despite being only a small proportion of fraud. Victims lost £171.7mn in 2021 as a result of fictitious investments in items such as gold, property and cryptocurrencies.
Social media websites have become a key vector for the spread of these scams. Under the UK’s online safety bill, introduced in parliament in March, major online platforms would have a “duty of care” to protect users.
However, on Thursday it was announced that the bill had been put on hold until at least early September when MPs return from their summer recess.
“The online safety bill has the potential to stop millions of pounds of scams every year by making the biggest tech firms take responsibility for the flood of adverts on their sites paid for by fraudsters to scam innocent people,” said Rocio Concha, director of policy and advocacy at consumer group Which?
“The government must commit to passing this important legislation. Any backtracking would be an unforgivable betrayal of scam victims.”
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