The links between debt and mental health cannot be ignored, and lenders have a responsibility.
According to NHS statistics, one in four adults experience at least one mental health issue in any given year. Further still, there are 800,000 people suffering from varying degrees of dementia, a figure that is expected to double over the next 40 years. This indicates a rapidly increasing number of people struggling to cope with daily life. It is clear that mental health is a topic we cannot ignore.
Adult mental health is often affected by everyday life stresses and, in particular, those related to finances. Essentially, mental health issues can lead to debt, and in turn debt can spark mental health problems. It must be understood that debt is not simply a financial problem but has the potential to cause relationships to break down, homes to be lost and lives to be shattered. The links between debt and mental health are well documented, and the business community is increasingly realising the responsibility they have to minimise this link.
Unfortunately, the manner in which some creditors pursue debtors can often exacerbate the problem or, even worse, cause a mental health episode.
Pursuing a debtor who does not have the current mental capacity to deal with the debt may lead to wider issues, such as the debtor’s health further deteriorating and the debt not being reclaimed. As mental health illness is often not long-term, careful consideration that allows the debtor to recover and face the debt when they are mentally able will most likely result in a positive outcome for all parties.
Lenders have a range of good practices available to deal with recovering debt from those dealing with mental health issues. General guidelines state that organisations should have a policy that ensures its collection teams are aware of how vulnerable debtors should be dealt with.
More than 56,000 businesses are regulated by the Financial Conduct Authority (FCA), which recommends a system with various checks and balances for dealing with people who have mental health issues. Creditors not regulated by the FCA would do well to follow its guidelines. The Morton Fraser recoveries team participated in a brilliant on-line course by MALG, and we recommend frontline collections staff should all be given basic training on how to talk to debtors who they suspect may be suffering from a mental health problem.
Additionally The Royal College of Psychiatrists provides useful guidance for debt collection teams, including what questions to ask, how to use the information obtained without breaching Data Protection, and what information should be provided to the debtor. Crucially, organisations who follow the FCA or MALG guidelines can be assured their actions are beyond criticism.
As the statistics indicate, mental health is one of the most pressing issues currently facing society, and it is imperative that businesses realise the impact debt can have on individuals, and the responsibility that lenders and collectors have to reduce that impact.
Maggie Moodie heads up law firm Morton Fraser’s Debt Recovery and Public Sector teams.