Katie Alpin, Interim Chief Executive, Money and Mental Health

Time for government to Stop the Debt Threats during Covid-19

3 June 2020

Covid-19 has already exerted a heavy cost  – on jobs, incomes, physical health and our wellbeing.

And it’s increasingly clear that we will be living with the consequences of this pandemic for some time to come. We need to think about the support people will need tomorrow, as well as today. 

Sadly, that means facing up to the approaching tsunami of financial difficulties. The government’s recent support measures, such as the job-retention scheme, grants to the self-employed and payment holidays on mortgages and other loans, have helped bridge the gap. But when these support programmes come to an end some people will not have jobs to go back to, and will continue to be unable to make ends meet. 

Thuggish debt threats

There are going to be many challenges to grapple with in the months ahead. But one issue we can clearly see now is the impact of the threatening, confusing letters that lenders are legally obliged to send to people who miss payments on mortgages, credit cards and loans. And, unlike many of the challenges ahead – this is one the government can easily fix. 

Outdated rules under the Consumer Credit Act force lenders to send letters to people who miss payments with threats of court action in bold, capitals or red ink – which most of us would read as being shouted at. More worrying still, while the letters do have signposting, it’s badly outdated and doesn’t point people to the brilliant organisations offering free debt advice who could help them resolve their problems. 

Lives at risk

These letters, landing on your doormat, encroaching on the safe space which your home should provide, can have a devastating effect. While the links between debt and suicide are complicated, we know that receiving these letters can contribute to people feeling trapped, alone, and hopeless. Over 100,000 people in England each year attempt to take their own lives while in problem debt. This group may be at higher risk in the months ahead if the government doesn’t take action now to amend the rules and modernise the content of these letters. 

Done properly, these letters could instead of a threat be an opportunity to point people towards free sources of support, and to help them move on with their lives. Even lenders agree, with five major banks backing our campaign to get the law changed.

Urgent action needed

Even more worryingly, the millions of people across the UK who have organised a payment holiday with their lender to help them weather the economic storm caused by Covid-19 could also receive these letters. Under current laws lenders have to send these notices when people miss two payments, even when that’s with the lender’s permission. This could cause even more confusion and stress, just when people are least able to deal with it. 

So today, we’re reiterating our call to the government to Stop the Debt Threats, 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. 

If you’d like to help us save lives and prevent unnecessary distress, please sign our petition here, and share on social media.