Tackling financial fraud: the online ‘debt scammers’ who prey on the vulnerable
Background and introduction
StepChange Debt Charity is the UK’s largest specialist provider of independent debt advice, helping hundreds of thousands of people every year with free online and over-the-phone debt advice and solutions.
We welcome this opportunity to submit evidence at the pre-legislative scrutiny stage of the Government’s draft Online Safety Bill, which aims to bring about substantial changes to the way online safety is managed in the UK.
StepChange believes that the powers in the Bill should be extended to tackle online financial fraud, including harmful online ads from unregulated lead generators and ‘debt scammers’ who prey on people in financial distress.
Online debt scams
StepChange has been highlighting the proliferation of online debt scammers for some time[i]. This is where unregulated lead generators use deliberately false or misleading search engine and social media ads to trick people who are financially vulnerable into giving away personal information.
The information in these ‘leads’ is then passed onto firms making a hard-sell for lucrative but often inappropriate debt ‘fixes’. The end result is a raft of financially vulnerable people who’ve lost confidence in genuine debt advice services, with many hoodwinked onto unsuitable debt ‘solutions’ at the cost of hundreds, sometimes thousands of pounds.
Debt clone whack-a-mole
StepChange and other debt advice charities are in a constant battle to have misleading advertising by lead generators taken down. Our experience is the big tech giants who dominate this space are too slow to act to prevent harm. Even when search engines do take action, it often feels like a game of whack-a-mole, with a slightly different clone advertiser popping up straight away in its place.
Our charity alone reported 72 debt scams across the major high profile tech giants last year[ii]. This includes fraudulent promotions from companies including ‘Steps2Change’ and ‘StepChanging’ who cynically infringed our brand and lured people to potential harm. Around 15% of people searching for StepChange and other debt charities by name have been diverted to a lead generator site by misleading paid search ads[iii] – equivalent to 1.7million click-throughs every year.
A client recommended to StepChange clicked on a copycat debt firm advertised via misleading online search results. After entering her personal information into what she thought was a genuine website, the client was pestered by phone calls into setting up an Individual Voluntary Arrangement (IVA). The client made a series of payments worth £650 meant for her creditors. It was only after contact from her bank four months later that she realised the debt firm she’d clicked to was a scam.
Having followed the top ranking link from misleading search engine results, a client received a call from someone purporting to work for StepChange. The client shared bank details and personal information, which passed to another firm that rang the client advising to take an IVA. However, the client thought something was not right and called StepChange. He was initially very distressed and mistrustful, explaining it had taken him a long time to build up the courage to seek help.
Impersonator ads top the search results – examples (Sep and Oct 2021)
Unfortunately, the major tech platforms are all too often failing in their duty to protect people who are financially vulnerable from being sucked into these online debt scams. Online tech giants take an approach that is far too reactive – but are also profiting from these ads in the first place[iv]. This places extra costs on charities like StepChange that are having to deal with the debt scammers, diverting staff from the debt advice frontline and draining valuable resource.
The wider problem here is that lead generators (also known as introducers) fall through a gap in regulation. Statutory regulators like the Financial Conduct Authority (FCA), Insolvency Service and Advertising Standards Authority (ASA) simply don’t have the powers they need to affect a meaningful clampdown. The ASA upheld complaints against two debt scammers in January 2021 which is welcome[v], but our figures suggest these online debt frauds are just the tip of the iceberg.
Serious financial detriment
The Woolard Review by the former chief executive of the Financial Conduct Authority has highlighted widespread concerns over IVA mis-selling and its link to unregulated lead generation[vi]. People desperate for help on their debts are often highly susceptible to the online debt scammers, yet all too often what the FCA calls ‘biased [debt] advice’[vii] can leave people seriously out of pocket, with set-up fees of around £1,000 on top of other highly dubious upfront charges[viii].
Figures from the Insolvency Service suggest the numbers of people losing out is growing fast[ix]. At least a quarter of people signing up see their expensive £4,000-£5,000 IVA debt plan[x] fail to reach completion, with many vulnerable debtors drowning under the toxic upfront fees they’ve been hoodwinked into paying and in worse debt than they started[xi].
Misleading search results and unregulated lead generators are a key reason why Woolard described the IVA sector as ‘a broken market’. We support the FCA’s recent call for comprehensive solutions to these problems, including extending its regulatory perimeter and tackling online financial fraud through the Online Safety Bill[xii].
Stop online debt harm
The Online Safety Bill provides a key opportunity to take action against the debt scammers. We believe the Online Safety Bill should oblige search giants and social media platforms to act decisively to prevent this type of advertising that preys on people who are vulnerable.
We support calls from others including the FCA, the Treasury Committee, and the City of London Police for online financial fraud to be designated as a priority under the Bill.
We believe the Government should ensure that the Bill covers fraudulent content in paid-for online advertising. This would be a key step forward in making tech firms take responsibility to protect the financially vulnerable and helping to end this pernicious harm.
16 November 2021
[i] For instance, ‘Copycat debt firms ‘tricking’ struggling Brits into paying to fix their finances’, The Sun, Feb 2021;
‘Unscrupulous advertisers and firms after thousands of pounds in fees are pushing Britons into debt solutions they can't afford’, Daily Mail/This is Money, Feb 2021; and ‘Fake advisers exploit flaws in UK insolvency regulations’, Financial Times, Feb 2020
[ii] In 2020 we reported 72 lead generators to major search engines and social media sites on account of misleading advertising or brand infringement.
[iii] StepChange research via SEM Rush from our successful complaint to the Advertising Standards Authority in July 2020.
[iv] A 'faker's dozen' of unauthorised debt advisers: Why is Google making thousands from these adverts despite crackdown pledge? Daily Mail/This is Money, September 2020
[v] Pressure grows to deal with online debt advice scammers as ASA upholds complaints, StepChange, January 2021
[vi] Woolard Review: a review of change and innovation in the unsecured credit market’, report to the FCA Board, February 2021
[vii] ‘biased [debt] advice’ p15 Latest FCA perimeter report calls for legislative change to protect consumers, Financial Conduct Authority, October 2021
[viii] Individual Voluntary Arrangements can be the best debt solution for the right people - but poor market practice means failure rates are higher than they should be, StepChange, January 2020.
The Insolvency Service highlighted concerns over front-loaded ‘disbursements’ at commercial IVA firms in 2018, the table below shows its findings on typical disbursements as opposed to nominee and supervisory fees. The Service said there is “limited evidence that many disbursements … provid[e any] real value. In most cases it is not clear whether they are required at all”.
Review of the regulation and monitoring of insolvency practitioners, Insolvency Service, September 2018
For examples, see 'We've paid £3k but could've wiped debt for just £180': Some advice firms just pick off fat fees and leave their victims even worse off, Daily Mail/This is Money, July 2021
[ix] IVAs are usually only recommended for those with more than £10,000 in debt. Despite the fact they are not always the best course of action, the number of IVAs has increased from 49,268 in 2016 to 78,478 last year, according to the latest figures from the Insolvency Service (Table 1), an all-time high for the third successive year. By contrast, take up of debt solutions, such as Debt Relief Orders, that are often more appropriate for people on low incomes, is down by 25%.
[x] Term charges for IVAs, as distinguished from set-up costs and ‘disbursements’, will vary but are typically in the region of £4,000-£5,000. These are paid by debtors yet effectively borne by creditors – so long as an IVA successfully completes. Individual Voluntary Arrangements: a guide, Admiral, October 2020
[xi] Individual Voluntary Arrangements, outcomes and providers, Insolvency Services, February 2021, and
‘IVAs are still potentially being oversold, while DRO proposed changes are welcome’, StepChange, February 2021
[xii] Latest FCA perimeter report calls for legislative change to protect consumers, Financial Conduct Authority, October 2021