Martin Lewis' charity says DWP is ‘more aggressive than banks' in clawing back debt
The Money and Mental Health (MMH) Policy Institute says that the way the DWP treats people who are overpaid benefits is 'harsh', and risks putting vulnerable claimants at risk.
Benefit overpayments occur when someone is paid more by the DWP than they are entitled to, most often because of a change in their circumstances or due to a an error by the department.
While these overpayments can accumulate over the course of many months without the claimants' knowledge, the DWP can rapidly begin taking payment within weeks of spotting the issue.
Agents can then directly deduct 15 per cent of someone's monthly universal credit payment to recoup these overpayments.
This can be a significant loss of income, MMH argues, with 15 per cent equating to a deduction of around £60 a month for a single adult aged 25 and over.
Meanwhile, commercial lenders would need to go through the courts to recoup debts, in a process which could take months.
Ahead of an expansion of the DWP's debt recovery powers, researchers from MMH argue that its powers should be reformed to be more manageable for those on low incomes.
The Public Authorities (Fraud, Error and Recovery) Bill currently passing through Parliament will give the DWP more ways to recover debt, including forcing banks to share account holders' transactions, and being able to make direct deductions even from people no longer on benefits.
The charity also argues that many people are unaware they are able to call the DWP to try to negotiate an affordable repayment plan.
This process could be brought more in line with consumer laws they add, with creditors like banks and energy companies required by regulation to engage with people who owe money.
The charity, which carried out research into the issue, said one person commented: 'Having money deducted from my benefits has made it difficult for me to make ends meet and some days I have been not eating because I can't afford to, which is leaving my mental health in tatters.'
The charity also said that debt management standards guidance on how to protect people in vulnerable circumstances from harm, including people with mental health problems, should be strengthened for all government departments.
MMH chief executive, Helen Undy, said: 'When people are paid more in Universal Credit than they are entitled to, it's often through no fault of their own, and sometimes the first they know of it is when the government takes sudden and brutal steps to claw those payments back.
'Many people we work with are already running out of money for food before the end of the month, suddenly taking £60 from what they have left plunges them into further financial hardship and needless distress.'
Ms Undy adds that the charity would 'like to see better standards applied across all government debt collection,' adding: 'It cannot be right that the state is lagging far behind the standards that consumer creditors have to meet in treating people fairly and with respect if they fall behind on payments.'
A DWP spokesperson said: 'While we would urge people to report a change in circumstances to avoid falling into debt, we understand debts do occur and will always support those struggling with repayments to agree affordable plans.
'We have introduced a new Fair Repayment Rate, which caps debt repayments made in Universal Credit at 15%, allowing 1.2 million households to keep more of their Universal Credit.
'Our new Fraud Bill will help us to identify overpayments at the earliest stage so we can help prevent people falling into debt, and to do so in a way that is fair and proportionate.'
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