IMMEDIATE RELEASE

Charity calls on government to end “thuggish” debt letters during coronavirus crisis

03 June 2020

• With millions of people facing debt problems because of the pandemic, the Money and Mental Health Policy Institute is urging the government to save lives by putting an end to threatening debt letters. 

• Research by the charity shows that over 100,000 people in problem debt attempt suicide each year in England — and intimidating debt letters are a key contributing factor.

• The government should urgently change out-of-date laws that force lenders to send ‘debt threat’ letters, as part of its financial support measures during the coronavirus crisis.

Money and Mental Health’s research shows that rules in the Consumer Credit Act (1974) compel lenders to send intimidating letters to people struggling with many types of debt (1). By law, these letters have to contain threatening and confusing language, often alongside threats of court action.

For example, the legislation demands that lenders’ debt letters must include the following complex and intimidating text in full when people are seriously behind on payments — and that this should be capitalised or in bold text:

• IF YOU DO NOT TAKE THE ACTION REQUIRED BY THIS NOTICE BEFORE THE DATE SHOWN THEN THE FURTHER ACTION SET OUT BELOW MAY BE TAKEN AGAINST YOU [OR A SURETY].

• IF YOU HAVE DIFFICULTY IN PAYING ANY SUM OWING UNDER THE AGREEMENT OR TAKING ANY OTHER ACTION REQUIRED BY THIS NOTICE, YOU CAN APPLY TO THE COURT WHICH MAY MAKE AN ORDER ALLOWING YOU OR ANY SURETY MORE TIME.
• IF YOU ARE NOT SURE WHAT TO DO, YOU SHOULD GET HELP AS SOON AS POSSIBLE. FOR EXAMPLE YOU SHOULD CONTACT A SOLICITOR, YOUR LOCAL TRADING STANDARDS DEPARTMENT OR YOUR NEAREST CITIZENS` ADVICE BUREAU.

The research also shows that 100,000 people in problem debt attempt to take their own lives each year in England, and that these letters are a key contributing factor (2). Receiving them from multiple lenders on a daily basis is leaving people in huge distress and unable to see a solution to their situation. 

Money and Mental Health is warning that this issue will escalate during the coronavirus crisis for two reasons:

• Many people in debt have been granted a temporary debt repayment ‘holiday’ by lenders, in which they don’t need to make repayments on mortgages, credit cards and loans (3). But lenders are still forced by law to send intimidating debt letters to anyone they consider to be in arrears in this period — even if they have been granted a payment holiday. 
• Even those who have never had financial problems, but have been granted mortgage or other official payment holidays, should by law receive one of these frightening letters after two missed payments. The regulatory authorities are currently looking to work around this law, but this will clearly cause unnecessary distress and confusion.
• In the long term, millions more people are facing the risk of debt problems due to the economic impact of the outbreak — raising serious concerns that threatening debt letters will contribute to unnecessary lost lives in the coming months and years. 

Money and Mental Health’s ‘Stop the Debt Threats’ campaign is urging the government to urgently address this issue, by updating rules in the Consumer Credit Act that dictate the content of debt letters. Small changes to these rules could make debt letters less threatening and distressing, and would save lives. 

Martin Lewis, Founder and Chair of the Money and Mental Health Policy Institute, said:

“The fact that lenders are forced by a decades-old law to send thuggish letters to people with debt problems is staggering. These letters ruin lives, and many lenders say they don’t want to send them, but the law gives them no option.

“In the next few weeks, we’ll have the perverse situation where lenders will be compelled to send threatening letters to millions of people, even if they’ve been given permission for a temporary break from debt repayments. That will cause distress and confusion at a time when people in financial hardship, and many struggling with mental health issues, least need it.

“The government has put support systems in place covering a chunk of the population. Yet at such a sensitive stressful time, it needs to change the rules on debt letters. It’s a simple change to get rid of a rule that benefits neither lender, borrower, nor the economy — and at this time, without exaggeration, it could save lives.”

ENDS

• Case studies are available
• To set up an interview, or for any other media enquiries, please contact Brian Semple, Head of External Affairs at Money and Mental Health, on 07935 216 804 or [email protected]

Notes to Editors

1. This includes repayments on overdrafts, credit and store cards, payday loans, and personal loans
2. Analysis of the national Adult Psychiatric Morbidity Survey (2014), undertaken by NatCen on behalf of Money and Mental Health, published in ‘A silent killer: breaking the link between financial difficulty and suicide’
3. In March 2020, the government agreed with banks that they will offer ‘forbearance’ on mortgages and other related for a three-month period. This was extended by a further three months in May. In April, the Financial Conduct Authority (the regulator for financial services) introduced similar measures on credit cards, loans and car finance repayments.

About the Money and Mental Health Policy Institute

The Money and Mental Health Policy Institute is an independent charity set up by Martin Lewis, and committed to breaking the link between financial difficulty and mental health problems. We conduct research, develop practical policy solutions and work in partnership with both those providing services and those using them to find what really works. www.moneyandmentalhealth.org

About the ‘Stop the Debt Threats’ campaign:

• Money and Mental Health’s Stop the Debt Threat campaign is aiming to put an end to intimidating debt letters, which are causing huge and unnecessary distress for people with problem debt
• The charity is calling on the Government to change out-of-fate rules in the Consumer Credit Act (1974), which force lenders to send threatening letters to people in problem debt. Making small changes to regulations under this Act would allow lenders to make debt collection letters easier to understand, less threatening and more supportive
• The campaign is supported by over 30 leading mental health and debt organisations – including Mind, the Samaritans, Citizens Advice and Royal College of Psychiatrists – and over 11,000 people have signed Money and Mental Health’s petition calling for these changes
• Five financial firms have also backed the campaign: Barclays, Monzo, nationwide, Metro Bank and Virgin Money
• The campaign has also been backed by the Treasury Select Committee, following the committee’s inquiry on access to financial services in 2019.