The hidden harm of financial abuse

20 May 2021

One in five women and one in seven men has suffered some form of financial abuse typically at the hands of their partner. Like all domestic abuse it is a hidden crisis that goes on behind closed doors, and lockdown, however essential for public health, will have made matters worse for many victims. It is vital that everyone involved in financial services do whatever they can to shine a light on this harm.

Covid-19 has created circumstances which can exacerbate domestic abuse and legislation has just passed through Parliament to help protect victims. Against this backdrop it’s timely to look more closely and consider the characteristics and impact of the economic and financial abuse that goes hand in hand with more recognised forms of domestic abuse.

The Domestic Abuse Act recognises the role that financial abuse plays in exerting control over victims and constraining their freedom to leave abusive relationships. And the long term damage and effects it has even after separation.

Control of finances can form part of a pattern of coercive control. Coercive control is a continuing act or a pattern of acts of assault, threats, humiliation and intimidation or other abuse that is used to harm, punish, or frighten their victim.

Financial abuse is a form of economic abuse reported to be present in 99% of cases of domestic abuse. The National Crime survey reported 2.4 million cases of domestic abuse in England and Wales for the year to March 2019 and this should be taken as minimum figure given the challenges faced by those who are in an abusive relationship reporting it. And since the Covid crisis hit in 2019 the numbers reaching out to police and helplines has risen, with service providers such as banks reporting an increase in cases.

How many people suffer financial abuse?

There are no completely reliable figures for the extent of financial abuse, as it operates under the radar, and research has found that victims are unlikely to report it: partly because they may not recognise it as an abuse, but partly for reasons of shame and cultural norms. Many people don’t like to talk about private money matters, even in the best of circumstances. But a survey by Opinium for the Co-op and Refuge in 2015 found that as many as 1 in 5 women had experienced financial abuse at some point in their lives.

These findings may mean that traditional research in this space may not always be fully representative. Since domestic abuse often involves the sufferer being denied access or control of their own finances, or indeed any access to financial services at all, it is by its very nature extremely hard for external agencies to spot.

But that cannot be an excuse to turn away from this problem.

At this time when Covid is providing cover for perpetrators of domestic violence, it is important to shine a light on how it manifests and the harm it causes.

What does financial abuse look like?

Financial abuse makes it extremely difficult for the victim to escape from their domestic situation. Victims suffer harm to their financial circumstances as well as the experience of physical and mental harm. This is why it is important that we recognise the signals and signs of financial abuse that trap people in abusive relationships.

The charity Surviving Economic Abuse explains financial abuse as harming the victim’s wellbeing in 3 areas:

  • Acquiring economic resources i.e. preventing someone from being in education, limiting working hours, taking someone’s pay, refusing to let them access benefits, stopping access to a bank account or financial products.
  • Use of economic resources i.e. controlling where money is spent and how purchasing decisions are made, making victims account for all their expenditure and explaining purchases, controlling use of any resource with economic value such as property, cars and mobile phone.
  • Maintaining abuse of resources i.e. stealing money, causing damage to property that incurs further cost to victim survivor, misusing money in joint products e.g. extending lines of credit, transferring shared money from a joint bank account, insisting bills/credit in victim’s name and coerced debt through placing liabilities in the victim’s name which leads to impacts on their credit files and economic stability.

What are the key harms and their impact?

A common practice is that assets are often placed in the abuser’s name and liabilities - such as bills and financial products which have charges attached to them - in the victim’s name. This causes harm and has consequences for financial lives which can last for a long time. It is helpful to consider the short-term and longer-term impacts of financial abuse separately.

In the short term the victim may have the stress of paying bills and not having adequate means to pay, incurring interest and fees on charges, and creating a spiral of debt. They may not be aware of the debts further to restricted access to account information, or have no opportunity to gather money to provide for children or buy essentials, or be able to get away, because they are overcommitted.

In the longer term this will impact on their credit score, savings, and in turn their ability to access alternative safe accommodation (such as private rental accommodation). The effect on their financial position may reach many years into the future. If they have been cut off from financial services they will have no credit record to facilitate products they need and they may not have documentation necessary to open accounts. This makes it even harder to rebuild, particularly where their economic potential has been harmed for example by denying them work experience or access to qualifications.

Financial abuse often continues or even begins post-separation and can compound the financial harm that occurred within the period of the relationship.

Loss of control is a key feature

Some victims experience employment sabotage, whereby the victim may be forced to take a career break or do a particular job which might be below their potential to earn or indeed be such that they are working to support the abuser. This kind of control damages a person’s economic potential and life prospects.

Control over records and documentation can be a powerful means of control – in the absence of access to eg passports, birth certificates and having a good or visible credit history it can be hard to lead a successful financial life, find employment or access services more generally.

Coerced debt – such as loans taken out in their name under pressure or unknowingly - accrued during the relationship, leaves the victim with a financial burden and, most likely, arrears and charges which continue to build up further when they leave the abuser.

Those who seek out debt advice services and have been subject to financial abuse are often very unclear on their financial situation and are unaware of the extent of the liability that they are carrying, due to deception by the perpetrator (which can be extreme in a lot of cases). 

The interception of post was another practice commonly reported which compounded the harm. A Citizens Advice report published in 2020, identified the role of post in domestic and economic abuse: half of survivors surveyed said that the perpetrator had intercepted their post. This interception would enable the perpetrator to hide bills and debt-related letters so that the victim could spiral into debt without being aware of it.

The perpetrators could also change the ownership of assets and liabilities whilst hiding the paperwork so that the liabilities would be in the victim’s name without their knowledge. They also highlighted the use of personal and financial details from intercepted post to be able to access the victim’s money (to steal or control access to it) and benefits, sometimes even after separation.

Who are the victims?

Desk research of existing literature, carried out by the FCA, had suggested that victims are more likely to be single parents, people with disabilities and/or on a low income. It is worth noting that Universal Credit is paid at household level which can make that easier to control by the perpetrator.

But while low income can be a factor in many cases, those who work with survivors are very clear that abuse happens across the population. Abuse is about exploiting access and control and was just as likely in a higher income household as a low income one. The difference may be that the latter may be easier to detect as those on low incomes can be more likely to come to the attention of authorities such as social services and the DWP than higher income households, where it was potentially easier to be hidden given the outward appearance of wealth.

Income is generally measured at household level but often that income belongs to or is controlled by the perpetrator, and so despite household wealth, measured on an individual level, victims experience material poverty. Some victims with the appearance of a higher income would have their resources tied up in investments or assets.

Anyone can be a victim of domestic abuse, including financial abuse, and it cuts across all levels of society.

A study by the Co-operative Society with Refuge in 2016 found that just under half (43%) of respondents who reported financial abuse had a personal income of up to £20,000. Another 28 per cent earned between £20,001 and £50,000 with 19 per cent earning over £50,000.

It also found that men who were victims were much more likely to be higher earners; women were more likely to report financial abuse in their 30s; and people with disabilities featured disproportionately in the sample. People in same sex or bi-sexual relationships were also statistically more likely to suffer from financial abuse according to this work.

Higher risk groups

Some BAME women were seen to be more vulnerable to financial abuse as they are often financially dependent on their spouse, and can experience a barrier between themselves and other institutions. Those with a limited command of English may rely on their partner for communication and are potentially more vulnerable to abuse and control.

There was also good evidence that single parents were more likely to be victims. StepChange with Gingerbread found 45% of single parents surveyed by them to have been victims of economic abuse. Financial abuse often continues or even begins post-separation. Having a child with the abuser heightens the post-separation vulnerability and often dictates a longer-term tie.

The charity Gingerbread has conducted research with debt advice providers StepChange on single parents who had experienced economic abuse and found that they were less likely to receive the specified amount of child maintenance payments, and that the amount paid was far more likely to fluctuate. They noted that quite often the abuser could afford to make the payment but chose not to or to delay, as a form of economic control. They identified purposeful unreliability for child care as being a form of control that could play into career sabotage where the victim is reliant on the ex-partner for child care support, so impacting the victim’s ability to attend work for example in a domestic emergency. This circumstance may be exacerbated by the pandemic.

The emotional impact of domestic abuse should not be overlooked; feelings of disempowerment, distance/isolation from family, financial pressures and for some, challenges associated with being a single parent can all impact whether a victim recognises that they need help as well as their ability to access it. Stress can sap energy, which makes it harder to tackle the abuse and situation.

Impact of Covid-19

It has been widely reported that the Covid-19 lockdown has created conditions in which domestic abuse can develop and worsen. Reports of abuse have increased, more people are seeking help and there is likely to be a group that continues to suffer in silence:

  • The Respect phone line, which provides confidential advice to perpetrators about violence and domestic abuse, had a 27% increase in calls in the week starting 30 March 2020, compared with the week before.
  • Refuge’s National Domestic Abuse Helpline has seen a consistent increase in demand of 50% since lockdown measures were announced; and
  • According to the Met Police the number of recorded domestic abuse incidents has seen a year-on-year rise – there were 17,275 incidents recorded between 9 March and 19 April 2020; a 9% increase on the same period in 2019.

The BBC’s Panorama programme aired in August 2020 found that there was one domestic abuse call every 30 seconds in the first seven weeks of first lockdown. SafeLives conducted a survey of survivors recently which showed that 61% were unable to reach out for support during lockdown. As we experience further phases of regional and national lockdowns concerns remain.

Public awareness is also increasing that this is a problem and the issues are coming into greater focus in public commentary. Campaigns have sought to highlight the situation and the Domestic Abuse Bill returned to Parliament in January after a pause, with calls to strengthen the legislation. The Bill officially recognises the role of financial abuse as a form of economic and domestic abuse.

Women’s Aid says the picture of financial abuse during the last year has intensified. According to its April 2020 survey almost a third of respondents reported that their abuser blamed them for the economic impact of the pandemic on their household.

Members of UK Finance, the trade body for banks and financials services, have also seen an increase in cases of abuse since Covid-19 hit.

Role of technology

Covid has also accelerated the use of technology. Technology has pros and cons in the context of financial abuse. It has played a substantial role in helping victims to reach out, but there is a significant issue of tech poverty whereby victims either do not have access to devices in general, or to safe devices. Victims with no access to technology are generally less able to challenge their situation.

On the flipside, perpetrators can use technology to track and monitor activities of victims. It can allow perpetrators more easily to misuse victims’ bank accounts, apply for loans, locate survivors, and harass them for example by sending abusive messages linked to transfers of nominal amounts of money to the victim’s bank account (you cannot block someone from sending money). In situations where perpetrators have access to the victim’s phone and passwords, having financial services available via apps makes it even easier for perpetrators to monitor and control victims.

Access to cash was still important for victims in abusive situations. Cash can be hidden when someone is trying to escape and retains its monetary value.

In practice it is debateable how much additional control technology provides abusers, who are likely already to have control over their victim. Abusers will seek control through any means available to them, so online services/technology may be seen to present just another opportunity for that.

Closing thoughts 

The plight of domestic abuse victims is receiving more attention, and the new legislation offers a way forward in terms of recognising forms of abuse including financial abuse. As we move forward it will be important to continue to raise the profile of domestic financial abuse – not least because lockdowns related to pandemic waves could be a feature of our lives for some time to come.

The FCA’s vulnerability guidance published on 23/02/21 recognises domestic abuse as a factor that is likely to place consumers in vulnerable circumstances, which mean they are especially susceptible to harm, particularly where a firm does not act with appropriate levels of care.

The fact that financial abuse is so well hidden and that its victims are, by the very nature of their situation, often invisible to the financial services sector and regulators cannot be a reason for inaction. Organisations need to be aware of the signs and to work together to improve the longer-term outcomes for survivors so that they can rebuild their financial lives alongside their physical and mental health.

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