‘I had no
clue why my universal credit claim was closed. I have not told DWP that my
circumstances have changed. I had taken out a loan for £5000 whilst I
made an appeal against the decision of the DWP; otherwise, I won’t be able to
pay my rent.’
Mila’s
situation raises a number of questions in terms of whether her Universal Credit
claim should have been stopped by the Department of Work & Pensions (DWP),
or if she should have obtained the loan in the first place to pay her rent or
that the appropriate loan company should have even given Mila the loan. When
I spoke to Mila though, her survival instinct drove her to make the application
for the loan. If she had taken it out unethically, that no doubt raises more
questions.
The Welfare
Reform Act 2012 introduced a number of changes in the benefit system. One of
these changes was the introduction of Universal Credit. Instead of making a
number of claims for means tested benefits - such as support for housing cost
and personal allowance; claimants would receive one payment per month, a claim
to be make online. Mila was a low income worker who worked consistent hours
but her income was not enough to cover her rent as a housing association tenant
in a gentrified borough of Hackney. A top up from Universal Credit was a way she
managed her finances. When her account was closed, the first thing in her mind
was to find a way to challenge the DWP.
The legal
process for Mila to make this challenge is to go through a Mandatory
Reconsideration process, whereby a decision made by its representative is
subject to an appeal. If Mila is unsuccessful with this process, she may have
to bring a claim to the First Tier Social Security Tribunal. If the decision of
the Tribunal is unsatisfactory for Mila, she may have to request for a
‘Statement of Reason’ within a month and then decide whether to make an appeal
to the Upper Tribunal. Legal Aid is only available to her if she considers
appealing to the Upper Tribunal.
If a delay
occurs in making the Mandatory Reconsideration decision to cause her financial
hardship then, according to Child Poverty Action: ‘a ‘quick win’ is possible
in cases of poor decision making and delay in public bodies making a decision.’
A threat of
Judicial Review may accelerate the decision-making process by the DWP. It
states that pre-action stage is cost free:
‘It just
takes [into account] the time of you writing the Pre-action letter. If the
decision is not changed at the Pre-action stage… with their claim [they] will
have lost nothing. If your client wants to proceed with their claim, legal aid
is available for Judicial Review.’
There is
also an issue with Mila when it comes to the ethics by which she obtained the
loan. If she obtained the loan by providing false information she may be
committing fraud. The lender would have to take Mila to the County Court
and recover the money under civil fraud claim. In my professional experience, a
lender rarely takes this step to recover the money. It may just bring a claim
for the debt owed.
In terms of
criminal fraud, however, Mila would be prosecuted by the Crown Prosecution
Service (CPS) in England. If she was prosecuted in the criminal
court and found guilty, she could be imprisoned and/or fined for obtaining the
money dishonestly.
Although
the focus has been on Mila’s actions and intentions to obtain the loan, what
responsibilities lie with the lender? According to the Financial Conduct
Authority (FCA) - the firm must undertake a creditworthiness assessment in
accordance to its rules and take into account due regard to the outcome of that
assessment in respect of affordability risk, in order for the lender to be a
responsible lender.
Naturally,
without knowing the full facts of Mila’s case, it’s difficult to know if the
lender has fully complied with the FCA’s rules. Also, did the lender request
for evidence of Mila’s actual income? Aside however, the real question
for me is: what steps has the creditor taken to show that it would able to
recover the loan from Mila?
Mila may
default in paying her loan. If she does, what debt option will Mila have to
resolve her problems? What can the lender do when Mila defaults in paying her
loan? According to the FCA: ‘When dealing with customers in
default or in arrears, a firm should pay due regard to its obligations under
Principle 6 (Customers’ interests) to treat its customers fairly.’
If the
suspicion is that the lender broke the rules, Mila may argue that it had lent
her the loan irresponsibly. If this is the case, she may initially want to make
a complaint to the company concerned. If she does not get adequate remedy from
the company, she could make a complaint to the Financial Ombudsman Service
(FOS). The FOS would then investigate Mila’s complaint and investigate the
actions of both Mila and the lender. This is what the HOS has to say if there
is a case for irresponsible lending:
‘Our
general approach is that the customer should be put back in the position they
would have been in if the problem hadn’t happened. We may also ask you to
compensate them for any distress or inconvenience they’ve experienced as a
result of the problem.’
Still, it
would be too early for me to jump to a conclusion on Mila’s case. It was
clear to me that Mila’s struggle for survival made her obtain the loan. When
ethics is involved, however, it raises a number of other questions - fairness
needs to be at the heart of the process either when she is borrowing or when
the lender is lending. It will be interesting to see the outcome of the
appeal process, when it comes to the DWP’s position, since for Mila, her
problems started once her benefit stopped.
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