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Debt Advice Handbook Scotland 1st ed - with new material

Coerced debt

• The impact of coerced debt
• Challenging coerced debt

Coerced debt is where a person is forced into taking out financial products for someone else’s benefit.

Clients may have been made to carry out financial transactions or take out credit in their name by the abuser.

For example, the abuser might:

•make the client take out a loan, mortgage or credit card against their wishes or in their name;
•use other sources of credit in the client’s name, such as car finance agreements;
•put bills in the client’s name, including utility or mobile phone contracts.

Advances in technology, particularly online banking, alongside lenders’ willingness to increase credit can make it easier to carry out economic abuse.

Online banking is commonly used by perpetrators to closely track their partner’s accounts and monitor their spending. Perpetrators can set up text alerts on their partners’ accounts, impose spending limits and take money out of their accounts using an online banking app without the client’s permission.

The impact of coerced debt

An abuser can use debt as a lever to gain power and control over another person, causing financial instability and dependency on the abuser.

One common indicator that a client is experiencing economic abuse is where all the assets have been placed in the abuser’s name and the debts in the client’s name.

In the short term, the client will have to deal with the stress of this situation and may have little or no opportunity to leave the relationship due to lack of funds. In the long term, it will affect their ability to get credit, save for a deposit to move to a safe place or travel to employment opportunities.

Challenging coerced debt

Some people may wish to challenge the liability of credit agreements they have been coerced into signing. This is not the right option for everyone and will depend on the client’s circumstances.

It can be very difficult to have coerced debt recognised by the courts and/or lenders, as they often assume that ‘couples’ are a financial unit. A client will usually be responsible for repaying the money owing on any credit agreements that are in their name.

There is no general exception for people who have experienced economic abuse and have been coerced into taking out credit.

However, there are some elements of law that may make it possible to challenge the liability for coerced debt in some cases.

•Consumer credit law: all organisations providing credit must follow consumer credit law. If they do not, a challenge could be made on this basis.
•Lender obligations: the Financial Conduct Authority (FCA) requires all credit providers to treat customers fairly. Challenges can sometimes be made if a lender has not upheld these obligations. These include properly assessing that a customer can afford credit repayments and checking that the customer has not been forced into taking out credit.
•Contract law: a contract with a lender may be invalid in cases of economic duress, undue influence or misrepresentation.
•Fraud: challenges to the liability of a credit agreement can also be made if the credit was taken out in in the client’s name without their knowledge. This is known as fraud, and it is a criminal offence. Laws exist to support people who have had credit fraudulently taken out in their name. Clients should report fraud to the lender and to the police. It is possible to negotiate with creditors to achieve partial or total write-off and a credit repair where there is agreement that the debt has been obtained fraudulently.