The impact of financial crime goes far beyond the monetary shock to those affected, according to a new study that calls for an overhaul of regulation and better support for victims.
The report, released on Thursday by the Transparency Task Force, a social enterprise group that advocates for greater transparency in financial services, also warned that the regulatory framework for the sector is failing.
“We found that victims’ experiences negatively affected all areas of their lives, with devastating financial, social, emotional and support costs,” the report said.
“The severity and extent of these impacts are particularly highlighted by the themes of stigma, depression, anxiety, suicide and social withdrawal; but even these alone do not give a complete picture.”
The report is based on 25 in-depth interviews with people affected by a range of financial problems. These include banks mis-selling products such as payment protection insurance, scams involving fake investment products and cases of mortgage prisoners, customers who are trapped into paying higher rates than the rest of the market.
The impact on their well-being ranged from lack of self-esteem and distrust of authority figures to social withdrawal and even suicidal thoughts. Victims often found support informally through online communities or campaigns.
More than 32.4 million complaints were made about PPI, an insurance product sold by banks to personal loan and credit card customers in the 1990s and early 2000s, with many lenders selling it to borrowers who could not claim or were unaware that make additional payments. buy one.
Lenders have committed a cumulative £50bn to fund compensation. On average, 87 per cent of PPI complaints are upheld, with compensation of £2,000 being paid.
“Financial fraud is a detriment to our economy, our society and our country. But financial fraud and abuse also have a huge human cost. As this document shows, it is destroying the lives of innocent people,” said David Pitt-Watson, a fellow at the University of Cambridge’s Judge Business School.
“This is a very serious problem in plain sight, the ugly elephant in the room. We can and must do much better.”
The UK is currently facing a “fraud epidemic”, according to banking industry trade body UK Finance. This includes a rise in scams where victims are tricked into sending cash to fraudsters posing as authorities, such as bank staff and police officers.
Investment frauds caused the biggest losses even though they represented only a small part of the frauds. Victims lost £171.7m 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, it was announced on Thursday that the bill has been put on hold until at least early September when MPs return from their summer break.
“The Online Safety Act has the potential to stop millions of pounds of fraud each year by forcing the biggest tech companies to take responsibility for the flood of adverts on their websites that pay fraudsters to trick innocent people,” said Rocio Concha, director of policy and advocacy in the consumer group What?
“The government must commit to passing this important law. Any withdrawal would be an unforgivable betrayal of the victims of the fraud.”