Katie Alpin, Interim Chief Executive, Money and Mental Health

The government must act to stop ‘debt threat’ letters during the Covid-19 outbreak

14 April 2020

Last week the Financial Conduct Authority (FCA, the UK’s financial services regulator) confirmed strong measures to support people struggling to make payments on credit agreements through the coronavirus pandemic. They include ensuring that people experiencing financial difficulties as a result of the virus can freeze payments on loans and credit cards for up to 12 months. The FCA’s measures came on top of the government’s existing promise that mortgage holders struggling to make payments should be offered a three-month break

One remaining problem

We welcome these measures from the government and the FCA to help people who can’t keep up with repayments during the coronavirus outbreak. There is one additional problem, however, which isn’t solved by these dramatic steps. 

Even when banks, building societies, credit card providers and other lenders are offering this respite, they will still be obliged to send confusing and actively unhelpful letters to customers. 

The Consumer Credit Act 1974 sets out that when a person falls behind on payments for their mortgage, loan or credit card, their lender must send them letters through the post. These letters must include, in bold, capital letters or red ink, threats about the consequences of failing to make payments, like court action. 

Unless the government takes urgent action to change this law, lenders will be obliged to send these letters even where they have reached an agreement with customers to pause payments for the time being. 

Not a trivial matter

It might seem like dealing with these letters is a minor issue, given the scale of the crisis. Yet Money and Mental Health research shows that over 100,000 people in problem debt attempt suicide each year in England alone. There are normally a wide range of issues which contribute to a person experiencing suicidal thoughts – but one factor which can make people feel trapped and hopeless is the letters they receive from creditors. 

Our research has shown that these letters often cause confusion and despair among those who receive them. With red ink, shouty capital letters, and intimidating, legal language, people tell us that these letters make them feel panicked, threatened and like there’s no way out. 

If these letters continue to be sent when someone has agreed a payment break with their lender, the risk of confusion and panic is even greater. With financial services struggling to manage the volume of incoming calls, people may struggle to get through to their lender to understand why these letters have been sent. This could cause serious distress – completely unnecessarily. 

Urgent action is needed

That’s why we have been campaigning for the government to change the rules on these ‘debt threat’ letters. It is essential that people get accurate information from their creditors about their obligations. But these letters are not achieving that aim. 

Right now, we are all scared and confused. The last thing we need is unnecessary, aggressive letters causing additional distress and panic. 

Many of the unhappy consequences of this pandemic are beyond our control. But the issue of ‘debt threat’ letters  is not. The government could take steps immediately to ensure lenders no longer have to send these unhelpful letters, and can instead send relevant, up-to-date and supportive communications to their customers. 

At Money and Mental Health, we’re continuing to press the government to deal with this issue. If you’d like to support us, you can join our campaign by signing the petition today.