Universal Credit — scams

A short form article on Universal Credit scam claims
(This September 2020 article is an updated version of an article that was first published on Medium in August 2019)

There was a spate of scams in 2019 concerning claimants on legacy benefits being offered “government loans” by strangers (sometimes pretending to be government officials) and then persuaded into disclosing their personal details, so a universal credit (UC) claim could be made in their name. The scammers then applied for a UC advance in the client’s name and took a share of the advance as their “fee.” Clients often only realised they had been scammed when they discovered that their legacy benefit claims had been closed and they then had a live UC claim and were expected to repay the UC advance, including any amount they had given to the scammer.

Unfortunately, with the increase in UC claims during the Covid-19 pandemic in 2020 and the accompanying relaxed security measures, we have seen another spate of fraudulent UC claims. The scope for abuse was vastly increased when ID checks commenced via telephone. The DWP were aware of this and apparently set up special teams locally to investigate the fraudulent claims

On 01/07/20, in response to a written parliamentary question, the Minister for Welfare Delivery, Will Quince stated:

“Where a claim to Universal Credit was prompted by fraudulent activity, and a claimant is a victim whose details have been used to make a claim, the Department will consider the reinstatement of legacy benefits if there is clear evidence that the claimant had no involvement in the fraud, and where the claimant wishes us to do so.”

So what can clients do?

Clients may be able to argue that they should not have to repay the UC advance and (if they would be better off) that they should be returned onto legacy benefits. However, the strength of their case may depend on whether they had been helped to make the UC claim themselves or if the scammers had submitted the claim without the client’s conscious consent.

Under Reg 8 of the UC (Transitional Provisions) Regs 2014 (S.I. 2014/1230) [and article 4 of the WRA 2012 (Commencement No 9 etc) Order 2013 (S.I. 2013/983) or their relevant commencement order], if a client makes a claim for UC (and for IS, HB & tax credits, the DWP are satisfied that they meet the basic conditions for entitlement to it), then entitlement to tax credits, IS, HB, ibJSA & irESA ends on the day before the UC entitlement begins (although the client may be eligible for a 2 week run-on payment of legacy benefits). DWP normally issues a ‘stop’ notice once the UC claim has been accepted, which is used to end the award of tax credits or other legacy benefits.

However, if the client has never made a claim for UC, then there is no reason to end the award of legacy benefits. So the client should submit a mandatory reconsideration (MR) of the decision(s), which ended their entitlement and argue that they had not made the UC claim so Reg 8 does not apply.

Of course, the client would need to show that the claim which has been made in their name was not in fact actually made by them. Under Schedule 2 para 6(1) UC (Claims & Payments) Regs 2013 (S.I. 2013/380), the identity of the sender of an electronic claim is presumed to be the person whose name is recorded on it, unless the contrary is proved. In addition, Sch 2 para 6(2) goes on to say that where an electronic claim is made on behalf of another person, then that other person is again deemed to have made the claim unless they can show that the claim was made without their knowledge or connivance. So the onus is on the client to show that they did not make the electronic claim for UC.

Unfortunately, there is no legislation or clear national guidance on what should happen in these cases but the clients should be able to return to legacy benefits, provided that the DWP accept that the claim was fraudulent and that the client did not actually make the UC claim (even if they were not aware that they were claiming or were “helped” to make the claim by the scammers).

However, things may be more difficult if the client did actually submit the claim for UC, even though they may have been misled or mis-advised into doing so. If they did actually submit a claim for UC, then their entitlement to legacy benefits ends and case law — HMRC v LD [2018] UKUT 306 (AAC) — CTC/12762018 — has held that even if they withdraw the UC claim, this does not allow them to return to their previous benefits. So the argument for returning to legacy benefits may be more limited in those circumstances.

Also, if the client financially benefited from the UC claim, it is arguable as to whether the DWP could recover the money from the client and /or whether they could be considered to have colluded with the fraud.

If the DWP attempts to recover all or part of the advance from the client, it is arguable whether they would have legal grounds to do so. They may attempt to recover it on the basis that the client has (at least partially) financially benefited from the fraudulent claim, especially if the client received part of the money from any UC advance payment. Clients should challenge the legal grounds under which recovery is being sought and seek further advice, if necessary.

Local investigation teams

It may be useful to check with your local DWP Partnership Manager to see what the procedure is in your local area, for investigating these fraudulent claims.

We have heard of special teams in two areas of Yorkshire, which have been specifically set up to investigate these “Stolen Identity” claims and which are responsible for contacting local clients who report fraudulent claims, investigating the claims and then closing the UC claims and reinstating the legacy benefits / tax credits again, as long as the client is deemed to have had no involvement with making the UC claim.

Although it may take 5–6 weeks for the investigations to be concluded and the benefits restored, unless the client would definitely be better off on UC (you need to carry out a better off calculation), they should be advised not to make another claim to UC, as this may complicate the investigation and will prevent their being able to return to legacy benefits (as the new claim will have been validly made by them and thus terminates entitlement to legacy benefits).

If the investigation finds that the UC claim was not fraudulently made, the client may have to remain on UC (but should receive arrears for any period, when UC was suspended).

As we suggested above, the client could challenge the decision(s) to terminate their legacy benefits/tax credits. It may therefore be prudent to immediately request a mandatory reconsideration (MR) of the decision(s) to terminate these benefits, and ask for the MR to be stayed pending the fraud investigation. The client will then have already requested an MR, in case the investigation does not result in their legacy benefits being reinstated. If they wait for the investigation to conclude they may have to submit a late MR request.

Other action, which may also be relevant:

• Report the scam to the local police
• Report it to Action Fraud
• Notify their bank, if the scammer has been given their account details
• Protect themselves from further risks e.g. change passwords or pin numbers, monitor their bank account for unusual activity, check their credit score for new credit applications — see Advisernet 2.60.10.4 — “What to do if you’ve been scammed” (if you are from Citizens Advice)
• Contact their MP’s office. MPs need to be aware of the problems caused by these scams. Also MPs have direct phone numbers for the DWP and can often expedite matters, such as helping the client to challenge a recovery decision or to regain their legacy benefits.

The client obviously needs to notify the DWP as soon as they realise that a fraudulent UC claim has been made in their name.

CPAG has also drafted pro-forma pre-action letters, regarding potential Judicial Review (JR) proceedings, in such cases. Although JR is always a last resort measure after the appeal process has been exhausted, the arguments in the letters may be helpful for drafting MR requests / appeals.

Sandie Lock works in the Welfare Benefits Expert Advice Team at Citizens Advice.