Back to Basics: how people with mental health problems are getting into debt just to pay for life’s essentials
Record demand for StepChange Debt Charity services
Last month StepChange Debt Charity published our 2016 Statistics Year Book. Of real concern was the fact that we saw record demand for our services last year, with one person contacting us for advice every 53 seconds. And for the first time in eight years the average level of our clients’ unsecured debt (for example through loans, credit cards and overdrafts) actually increased.
For the last six months of 2016, we collected more data on our clients with mental health problems, as we know that debt and mental health are strongly linked. People with mental health problems are more likely to be in debt than those without, and being in problem debt itself can lead to poor mental health.
Debt and our clients’ mental health
We know from a survey of almost 2,000 of our clients last year that 67% said that they suffered from stress or anxiety, 47% from depression and 16% with an on-going mental health condition. But we’d never looked before to see whether our clients with mental health problems had particular debt problems. When we did this year we saw a clear difference in the debts they owe.
A struggle to pay for the basics
Our survey showed that a lower proportion of StepChange Debt Charity clients with mental health problems have credit card, overdraft or personal loan debts than those classed as ‘non-vulnerable’. But the proportion who owe money on essential bills, including energy, water, council tax and rent, is much higher.
This suggests that our clients with mental health problems are much more likely to be in debt because they can’t afford to pay for essential items. And they are less likely to have credit through the more traditional routes of credit cards, overdrafts and personal loans.
So, it is StepChange Debt Charity clients with mental health problems who are more likely to have fallen into problem debt from simply trying to heat their home, cook meals or pay their rent. And it is these clients who are more likely to face the extra pressures of visits by bailiffs to collect any council tax they owe.
Escalating financial difficulties
Work by the Money and Mental Health Policy Institute has shown that people with mental health problems are more likely to struggle to deal with the organisations that they owe money to and so may be less likely to be able to arrange a constructive way to repay their debts. For example, conditions like anxiety can make opening post or answering the door very difficult and depression can leave people without the motivation to sort out their financial difficulties.
Organisations should have robust processes in place to identify people in debt who are in vulnerable circumstances, including those with mental health problems. And best practice guidance states that they should not refer their debts on to bailiffs or debt collectors.
However, 83% of our clients who have made organisations aware that they are in vulnerable circumstances told us that at least one didn’t take account of this when chasing them for payment of their debts or arrears. And, nine out of ten of our clients who have been contacted by bailiffs in the last two years say they have some level of vulnerability. This calls into question how well both creditors and bailiffs are taking vulnerable circumstances, such as those currently suffering from a mental health condition, into account.
With the added stress of debt collection
The additional stress of debt collection and bailiff activity to recover money owed can also heighten existing mental health conditions and contribute to their development . Over half of our clients contacted by bailiffs said the experience made them feel unsafe in their own homes and 49% told us that they had a doorstep visit from the bailiff that was “intimidating”. Our clients have also told us that bailiff visits:
“increased my depression and post traumatic stress disorder and gave me agoraphobia”
“feel like dying”
and that they:
“have caused me illnesses – panic attacks, depression and escalated blood pressure.”
What needs to be done?
There is a lot of guidance already out there about how organisations should treat people in debt who have mental health problems. We want to see more monitoring and regulation of this support.
- There should be binding good practice standards on dealing with the debts of people in vulnerable circumstances, such as those recently published by the University of Bristol. These should focus on debt recovery practices and policies that have affordable and sustainable repayments at their heart and prioritise supporting people to financial recovery.
- People who seek advice for debt problems should be given a Breathing Space protection of up to a year in which interest and charges are frozen and enforcement action is halted to allow them time to stabilise their finances. This time would allow those with a mental health condition to get support to manage this.
- The Ministry of Justice should firm up standards for protecting vulnerable customers, including those with a mental health problem, from intimidating bailiff action.
- And there needs to be more consideration of how levels of welfare payments can be designed to better prevent people, including those who receive such payments as a result of their poor mental health, from falling into financial difficulty in the first place.