DWP Announces Six Exemptions for Bank Account Seizures to Prevent Financial Hardship
The Department for Work and Pensions has revealed plans to spare individuals from bank account deductions under six specific circumstances, aiming to protect those at risk of financial hardship. This initiative, part of a new consultation launched by the Labour Party government, will focus on benefits with high rates of fraud and error, including Universal Credit, Employment and Support Allowance, and Pension Credit.
Defining Financial Hardship in the New Legislation
According to the proposed Bill, financial hardship is defined as an individual's inability to meet essential household needs due to their financial situation. Essential living needs encompass expenses such as food, utilities, and housing costs. The DWP must be satisfied, based on information from banks or individual representations, that a direct deduction order will not cause hardship before proceeding.
The list of exemptions is not exhaustive, and cases will be evaluated on an individual basis, as per guidance from the Labour Party government. Indicators of financial hardship that may qualify for exemption include:
- Having no or very limited disposable income after covering essential expenses
- Reliance on credit and borrowing to survive
- Existing payment plans for repaying other debts
- Being subject to debt relief support, such as bankruptcy, insolvency, or breathing space arrangements, including those for mental health
- Facing other enforcement payment obligations
- Experiencing sudden financial shocks, such as job loss, bereavement, health crises, or domestic abuse
Challenging DWP Decisions and Bank Collaboration
If the DWP determines that an individual can afford to repay a debt, it will notify them of its intent to use a direct deduction order to withdraw funds directly from their bank account. Affected individuals will have a one-month window to challenge this decision.
The DWP has stated it will collaborate with the 15 largest banks in the United Kingdom, including major institutions like Barclays, HSBC, Halifax, NatWest, and Santander, to implement these measures effectively. This partnership aims to ensure that the process is handled sensitively and in accordance with the new hardship guidelines.
This move reflects a broader effort to balance debt recovery with social protection, ensuring that vulnerable populations are not pushed into deeper financial distress. The consultation period will allow for public input and refinement of the criteria before full implementation.
