‘Landmark’ decision could lead to better protection of disability benefits

A “landmark” decision has forced a regulator to examine whether credit companies should be allowed to take disability benefits into account when calculating if disabled people can take out risky loans at high interest rates.

The decision (see complaint 202500121) means that the Financial Conduct Authority (FCA) will have to look at how it implements rules affecting the way credit firms, banks and other financial companies operate.

The conclusion by the Financial Regulators Complaints Commissioner (FRCC) could eventually prove helpful for campaigning disability organisations and have broader implications for consumer protection and financial regulation.

This is because it relates to laws on whether disability benefits must be treated differently than wages because they are intended to cover some of the additional costs associated with disability.

FCA currently takes a relaxed approach to the rules, which means credit companies and others it polices are allowed to treat disability benefits such as the support group element of employment and support allowance, and personal independence payment, as ordinary disposable income.

This approach allows credit companies to offer loans at high interest rates to disabled people under financial pressure, which they are unlikely to be able to afford to pay back, leading them into a deepening spiral of debt and financial hardship.

It also allows companies to seek higher repayments when a disabled person falls into debt.

Paul*, a disabled campaigner with concerns about the protection of disability benefits and the state’s duties toward disabled people, believes these firms are breaching the Equality Act, data protection laws and the UN Convention on the Rights of Persons with Disabilities.

This is because – as the law makes clear – disability benefits are intended to meet some of the extra daily costs a disabled person faces and should not be treated as disposable income.

He believes FCA is breaching the same legal obligations by not doing more to protect disabled people when they lodge complaints about the way they are being treated by financial companies.

In a complaint to FCA, Paul called for it to do more to protect disabled consumers and their private information.

When FCA rejected his complaint, he complained to FRCC, which deals with complaints against financial regulators.

Now FRCC has decided that Paul’s complaint was “materially different” than the complaint he made to FCA, and that it raised “new legal arguments”.

FRCC says in its report – issued on 2 July and published today (7 August) – that his complaint “raises potentially serious legal issues relating to the protection of disability benefits”, FCA’s duty to protect “vulnerable consumers”, and FCA’s obligations under the Equality Act and human rights law.

It has now asked FCA to look at Paul’s new complaint, and whether it is failing in its “interpretation, supervision, and enforcement” of its rules, which it has agreed to do.

Paul said it was a “landmark” decision that had “significant implications for the intersection of disability rights, data protection law, and financial services regulation”.

He said the FRCC decision could eventually lead to better protection for disabled consumers, both in how disability benefits are treated in financial assessments, and how financial companies treat disability benefits data.

He told Disability News Service: “The FCA has been allowing financial institutions to operate unimpeded by court rulings.

“The only solution for disabled people has been to pursue a judicial review, an option that is available only to those with adequate resources.

“This effectively creates a two-tier justice system where established legal protections remain theoretical rather than practical for most disabled people, creating a substantial human cost.”

He added: “When protected benefits are treated as disposable income, it creates a harmful cycle.

“Money meant for disability-related costs is diverted elsewhere, leaving essential needs unmet.

“As people repay loans, their resources continuously diminish, deepening financial hardship and limiting future options.”

FCA declined to comment on the concerns raised by Paul in his complaint.

But an FCA spokesperson said: “There was a misunderstanding about what the complaint was about.

“Now that we’re clear what the concern is, we’re happy to look into it.”

*Not his real name

Picture: The London headquarters of the Financial Regulators Complaints Commissioner

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