His debt in her name: Economic harm in which lenders are complicit

Thursday, 25 November 2021

Monitoring and analysis of bank transactions has uncovered thousands of concerning messages hidden in the reference fields

EXPLAINER: In New Zealand, Canada, Australia and the United Kingdom, Friday is Economic Harm Awareness Day.

It’s the third time the event had been held in Canada, but it’s a first for New Zealand, so the term “economic harm” needs some explaining.

And so does the insidious complicity of the finance and business sector.

Economic abuse is a little-recognised form of family violence, says Nicola Eccleton, manager for social inclusion at Good Shepherd, and economic harm is the result of that abuse.

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Economic abuse has tended to be classed as a form of psychological abuse, and is classified in the Family Violence Act 2018 under psychological abuse.

Financial abuse researcher Dr Ayesha Scott says women are the most common victims of economic harm and abuse, but there are men who fall victim to it as well.

A recent study from the University of Auckland suggested it was on the rise, possibly because people who abuse their partners may see it as a low-risk abuse option, as it is seldom prosecuted or recognised.

But economic abuse has its own unique features of harm, which is why Good Shepherd, a charity that exists to support women, including with free and low-cost “good” loans, is calling for it to be made a crime in its own right.

What is economic abuse?

Economic abuse is the “weaponising of money” by a controlling intimate partner, says AUT researcher Ayesha Scott.

It can involve many abusive behaviours; denying the victim access to accounts, information and decision-making rights, severely curtailing their choices regarding purchases, and forcing them to account for every cent spent.

And this is abuse that can continue even after a victim escapes from a relationship, if they have been coerced into taking out debts for their partners, such as buying them a car.

Victimisation continues after abuse ends

Natalie Vincent, chief executive of social good lender Ngā Tāngata Finance, says not a week goes by without a woman coerced into debt seeking help from her organisation.

This week was no different.

“He forced her to take out debts in her name. Now, he's gapped it, and she’s got debt collectors chasing her. We hear this all the time. It’s horrendous,” she says.

Lenders know it is happening, and sometimes, when confronted with evidence of economic abuse, they will write off debt, or cut it, she says.

It's not just lower-tier lenders. It’s bank debt too. And consumer debt, Vincent says.

“This happens with buy now, pay later. It's registered in her name, but he’s busy racking up all the debt,” she says.

“This has been going on for years. Women take out car loans for adult partners, adult sons, all the time, and these people disappear, and they are left with the debt.”

Unwitting accessories to the crime

Banks, and other businesses like power companies, are beginning to wake up to the ways in which they become unwitting accessories to abuse.

“We saw this with the transaction abuse,” says Scott. where abusive messages were sent in the reference field on bank payments.

Banks hadn’t looked at what people were writing in the text section when making a transaction, she says.

“When they did look, they were horrified,” Scott says.

Abusers, including those stalking ex-partners, were using online banking as a way of continuing to harass their victims.

Last year, ASB changed its terms and conditions to “make it clear that it’s unacceptable to use ASB’s services to harm, harass, abuse, intimidate, or to encourage physical or mental harm or violence”.

Bank of New Zealand and Westpac pledged to “unbank” abusers.

For Scott, this sudden waking up reveals how easy it is for companies to be unwitting facilitators of economic abuse.

“We’re seeking to say, ‘Hang on, this isn’t right,’ and ‘hang on, organisations and institutions within our financial system, be they telcos, or power companies have a role to play here’,” she says.

Is the finance and business sector also actively complicit?

Some policies of banks, other lenders and the likes of power companies facilitate economic abuse.

If a man has a bad credit record, it may be his partner is the only one able to sign up for a power account.

He enjoys the benefits of the power, but if the bill isn’t paid, she's the one chased for the debt.

Lenders are not always diligent in checking there are not secret beneficiaries of their loans, such as in the case of a loan to buy a car for a coercive partner.

Joint loans are also “joint and several”, meaning lenders, banks included, can chase just one of the borrowers for the money.

Advocates are calling for the Government to make economic abuse a form of family violence in its own right, rather than a subset of psychological abuse. They include Nicola Eccleton, manager for social inclusion at Good Shepherd.

Too often they chase the woman, says Eccleton.

She’s often the easiest to find, she says. She’s often more invested in paying, if she is responsible for children. She needs the power to stay on. She needs a good credit rating, if she is to have any hope of securing a decent rental.

“It's easy for the lender to carry on with who is paying. There’s no real incentive for them to go and chase the other person. It’s a very easy outcome for the lender,” she says.

Changing the rules

Campaigners are beginning to think about how things need to change.

Dame Diana Crossan, former Retirement Commissioner, wants to see economic harm and abuse as widely-understood, and condemned, as family violence.

Should power companies have to record both adults in a relationship on the power bill, and split the debt evenly should one do a runner?

Should lenders have to dig deeper to spot possible economic abuse before making loans?

Should we create new laws on fair division of loans after a relationship between joint borrowers ends, including not penalising one of the joint borrowers when the other refuses to pay?

Eccleton gives the example of a joint loan she saw recently.

“There’s a car loan in place. He's no longer repaying. The lender has said there’s nothing it can do… penalties accruing while he’s not paying it. That effects her credit rating. She’s already got a protection order in place, and there’s no obligation for the lender to put a pause on these penalties, which I find astounding,” she says.

Dame Diana Crossan, chair of Good Shepherd, says there is still a lack of understanding and awareness of the problem, which has resulted in poor identification, protections and support systems.

“Consequently, economic harm is a largely unaddressed form of abuse in Aotearoa, despite it affecting all socio-economic groups, locations, sexual orientation, and cultural backgrounds.”

Crossan, a former Retirement Commissioner, started her career as a probation officer.

She sees economic harm and abuse as the third great societal step in addressing abusive relationships.

“It took us a long time to get physical abuse within a relationship to be seen as a crime. When I first started as a probation officer, the policy of the police was not to interfere with a ‘domestic’,” she says.

“We then moved to the psychological abuse. It took quite a long time for people to understand how controlling people can be with psychological abuse.”

Should economic abuse be a standalone crime?

It's worth considering, not least because then we would have to discuss the penalties.

One of those could be giving the courts the power to reassign debts, so the harm from economic abuse does not continue to blight the life of the victim-survivor.

“There needs to be a conversation about what happens if this relationship ends, and that is not something that currently happens,” Eccleton says.

“You absolutely should be able to reassign debt. The ongoing impact on someone being able to over power the other with violence, who then spends the next five years paying the debt,” she says.