Martin Lewis has issued a warning about changes to bank accounts from the Department for Work and Pensions (DWP).
Ministers have argued the change will speed up the debt recovery process and help contribute to a wider crackdown on benefits fraud.
The UK banking industry has raised concerns that the Government’s plan to tackle benefit fraud could put banks at risk of violating consumer protection rules.
Under the new law, the DWP can reclaim money from accounts without a court order. While ministers argue this will speed up debt recovery, UK Finance warns that it could undermine banks’ efforts to protect vulnerable customers.
Commenting on the changes, Lewis took to X and wrote: “Banks are (rightly) objecting to allowing DWP to take back benefits money directly via people’s bank account.
“YET I’ve never heard em object to the rule of Setting Off which allows banks to decide to directly take money from ur account to pay off another debt with them…” (sic)
Martin Lewis comments on banks concerns on DWP benefit debt recovery power under fraud crackdown
PA/GETTY
The Money Saving Expert highlighted that both situations involve “taking money from your bank account without permission”.
Responding to a man’s reply, Lewis added: “Ultimately for the individual both have same effect ie using position of power to make yourself priority creditor, when that may be destructive. For me, that is a valid comparison.”
The new law will be passed under the Public Authorities (Fraud, Error & Recovery) Bill, which aims to save £8.6billion over five years by cracking down on benefit fraud.
Privacy campaigners have described the measures as “one of the biggest attacks on welfare in a generation,” as the bill is set to give the DWP new powers to access bank statements of individuals suspected of benefit fraud and require banks to report potential violations of eligibility rules.
The DWP would be able to make banks take money directly from claimants’ accounts through “direct deduction orders.” Banks could charge fees to process these deductions.
Before taking any money, the DWP must check the claimant’s bank statements for the past three months and ensure the deduction won’t make it hard for them to cover basic living costs. The new rules mainly target people who are no longer receiving benefits or who are self-employed.
This new system will first be tested by a few banks and building societies before being fully rolled out in 2029. Banks have quietly opposed these plans for over a year, and this is their first public objection.
Under the new rules, banks would need to flag accounts showing foreign activity or holding more than £16,000 (the Universal Credit savings limit).
Banks would be required to share account holders’ details, including names, dates of birth and account numbers, in cases where benefits may have been incorrectly paid.
UK Finance, representing major British banks, has warned that the new powers could force banks to breach their existing consumer protection obligations.
LATEST DEVELOPMENTS:
Daniel Cichocki, director in economic crime and policy strategy at UK Finance, said the plans need further examination to ensure they don’t “create risks for vulnerable customers, or conflict with existing regulatory and legal obligations”.
The banking group specifically highlighted potential conflicts with the Financial Conduct Authority’s consumer duty, introduced in 2023.
This duty requires banks to maintain higher standards for consumer protection, with specific obligations to protect financially vulnerable customers. Banks face penalties from the FCA or financial ombudsman if they breach these protection rules.
While supporting anti-fraud efforts in principle, UK Finance called for more focus on preventing fraud from entering the benefits system initially.
Work and Pensions Secretary Liz Kendall said the new powers would include “new and important safeguards”, including annual reviews by an independent body.
The DWP is is line to be awarded new powers Getty
The Government argues these measures will speed up debt recovery and contribute to tackling benefit fraud, which amounted to £7.4billion last year – around 2.8 per cent of total welfare spending. A further £1.6billion was overpaid due to claimant errors, while £800million resulted from DWP mistakes.
Officials say the powers would help reclaim funds from those no longer on benefits or self-employed individuals while easing pressure on the court system.
The DWP maintains that while they can request bank statements, they will not have direct access to bank accounts. They estimate these measures could save taxpayers around £500million annually once fully implemented.
Privacy campaigners have branded the measures “one of the biggest assaults on welfare in a generation” as the bill is set to grant the DWP new powers to obtain bank statements from individuals suspected of benefit fraud and require banks to flag potential breaches of eligibility rules.