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Debt & Mental Health

The Money Advice Trust has been at the heart of a step change in progress in understanding how to deal with the twin issues of debt and mental health over recent years.

The link between debt and mental health problems has long been well established, but until the Money Advice Liaison Group (MALG) set up a Working Party to investigate the issues in September 2005, little had been done about it. The Money Advice Trust has now been working closely with the Royal College of Psychiatrists, mental health charity Rethink and MALG for a number of years, and has produced award winning research, guidelines, and training to help individuals suffering from mental health problems to deal with their debts in a fair and sustainable way.

A number of important mental health and debt guides/publications have been produced to support advisers and creditors in this process. These resources can be found here.

In June 2011, we wrote an article for ICM Magazine explaining our reasons for tackling the debt and mental health issue. We continue to believe that debt and mental health are intrinsically linked issues which require special consideration by both advice agencies and creditors. The article below sets out why:

John is 42 years old, married, working full time and has bipolar disorder. He is most certainly not alone. In the UK today one in every 100 people is living with bipolar disorder, and one in every six of us has a mental health problem.

Earlier this year John agreed to help our project to improve the way in which creditors can deal with people with mental health difficulties. John has personal experience of being in debt and struggling to deal effectively with creditors. John’s financial problems started back in 2002 and he jokes that he was ahead of the game and led the way for the recession. But it quickly becomes apparent that for John, being in debt was no laughing matter.

“Bipolar is a mental health condition that makes my moods swing up and down. When it’s up, it can make my spending irrational so without proper financial advice I can overspend, which is what happened to me. Then, when overspending hits in, I have the negative swing which is like dropping into an abyss.”

For creditors, dealing with customers with mental health difficulties can be a challenging issue. Developing a sustainable repayment plan which takes a customer’s mental health problems into account is clearly key, as is the need to treat the customer as fairly and sensitively as possible. The Money Advice Trust and Royal College of Psychiatrists has long had strong anecdotal evidence that such challenges needed to be met, and so back in 2008 set about a programme of identifying and solving the constituent problems in the relationship between creditors and customers with mental health difficulties.

The squeeze on household incomes is now a universally accepted fact, with the Governor of the Bank of England recently acknowledging that ‘real household incomes’ – that is income set against the cost of living – has suffered its biggest drop in over 30 years. This is likely to lead to an increase in debt problems, as people turn to credit to maintain an acceptable standard of living.

Debts and mental health are closely related with causal links in both directions. If you have a problem with debt, you are twice as likely to go on to develop a common mental disorder. Similarly if you have a mental illness you are more likely to develop a problem debt. In a time of increased debt problems, it is therefore imperative that creditors have a robust mechanism in place for dealing with customers suffering with both issues. Otherwise creditors will be missing vital information and an opportunity to intervene; leading to broken payment arrangements and additional costs for the creditor, as well as possibly worsening in the customer’s health and a lower likelihood of engagement.

There is a solution that can be both better for business and better for the customer.

For the creditor, a better process of engagement with this type of customer will mean that mental health disorders do not have to equate to a write-off. This view is echoed by creditor staff themselves, of whom 59 per cent also believe that taking mental health into account when speaking with a customer can increase the likelihood of debt recovery.

For the customer with mental health difficulties, a creditor that can properly engage with the issues they are facing can mean the difference between being able to repay their debts and being trapped in a cycle of growing financial problems and further mental health issues.

In 2007, the Money Advice Trust, along with the Money Advice Liaison Group (MALG) brought creditors and experts together to address the growing concern of identifying and supporting debtors with a mental health problem. Progress was good and in 2008 the Debt and Mental Health Evidence Form (DMHEF) was created to allow debtors to provide evidence of their mental health in a recognised format. However, this was only one small step on the road to a better way of dealing with mental health difficulties and debt, and we were concerned at how recovery staff could approach customers like John who really struggle to engage with the collections process.

In 2009, The Royal College of Psychiatrists worked with the Money Advice Trust and MALG to carry out the first-ever survey into the experience and views of UK creditors' staff on working with indebted customers who report a mental health problem ( Funding for the project was secured from the Friends Provident Foundation and 19 different creditors, debt collection agencies, and debt purchasers agreed to take part. 1,136 mainstream staff and 134 specialist staff completed the anonymous survey, amounting to an unprecedented depth and breadth of study into how creditors respond to people with mental health difficulties.

In Autumn 2010, the now award winning research was published at the annual MALG conference in London.

The findings of the research were startling. Creditors’ staff told us that mental health is the most difficult issue to deal with, over any other customer issue, and almost half find it difficult to discuss customers’ problems, because they simply feel they don’t know enough. On top of that, legal issues were uncovered as we found that nearly 40 per cent of staff will breach the Data Protection Act when recording notes. 70 per cent wanted training on how customers’ financial situation was affected by their mental health problems. It was clear that such customers provide a significant daily challenge to staff.

In 2011 both the British Bankers Association and the Finance and Leasing Association recognised the importance of this research and made further amendments to the Lending Code requiring all creditors to have the ability to deal appropriately with customers with mental health difficulties. This required subscribers ensuring “that their processes and systems are responsive to a customer in financial difficulties, from the point at which they are made aware of a mental health problem”. The Lending Code indicated that this, for example, could include: sensitively managing communications with the customer (for example preventing unnecessary and unwelcome mailings); asking customers how their mental health problem impacts on their ability to repay their debt; and suggesting the customer obtain support from a family member or carer.

The research report recommended a number of practical steps to resolve these issues, including providing all front line collections staff with training in this area.

Almost immediately the Money Advice Trust partnered once more with the Royal College of Psychiatrists, as well as mental health charity Rethink Mental Illness to develop training for recovery staff that would enable them to apply the practical steps recommended in the research report, and the new requirements of the Lending Code.  

John told us that he would have preferred for his creditors to have asked about his mental health problem,

“I would much rather be asked and work a way forward together.

“My mental health not only had the effect of making me feel totally and utterly worthless, out of sorts and lacking in energy, but also made me unable to effectively deal with my financial problems.

“Trying to explain it to someone who doesn’t have mental health problems is very difficult… you become irrational. So what may seem to be a fairly small issue for a normal person who’s dealing with finances, is an absolutely enormous issue for someone who has mental health issues. Just one missed bill to me would cause me an immense amount of stress, whereas one missed bill to someone else may not even affect them at all.”


More information on Debt and Mental Health can be found on the MALG website
Find out about our mental health training for recovery staff here
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