Haylie Page, External Affairs Intern, Money and Mental Health
Supporting those with problem debt during the pandemic
22 October 2020
Earlier this month, I attended the Centre for Social Justice’s event: ‘How do we solve the problem of problem debt in the wake of Covid-19?’. The event coincided with our announcement that we’d stopped the most distressing debt threats and served as an important reminder of what has been achieved, but also what more could be done to support people in problem debt.
Before the pandemic, 5.3 million were facing problem debt. But, as the economic fallout of the pandemic unfurls, the furlough scheme ends and redundancy levels begin to rise, many households will be facing rising levels of debt and financial difficulty.
So, how could the government support people with problem debt, both immediately through the pandemic and in the longer-term?
Short-term solutions to a long-term problem: bad bailiff behaviour
As many families and households face increased financial difficulty, the panel was in agreement that aggressive bailiff action is a major issue. Money and Mental Health have long campaigned on this issue with our partners in the Taking Control group, and the need to end bailiff action has never been more urgent.
Our research has already shown that bailiff action can severely impact people with mental health problems — increasing feelings of fear and anxiety. It can also make financial difficulty worse, as intimidation pushes people into making repayments agreements that are unaffordable. And, prolonged financial difficulty, as we have demonstrated, can sadly lead to feelings of helplessness and can even be a factor which contributes to people taking their own lives.
During the event, Joanna Elson of the Money Advice Trust, drew attention to alarming stories emerging from areas in local lockdown, whereby bailiffs are practicing with increased intimidation, and in some cases, illegally. She called for an immediate review of this by the government, to stop unlawful bailiff action leaving many people with problem debt in fear.
Baroness Morgan and Lord Pickles of the Conservative Party, also highlighted the alarming reliance of the public sector — particularly local councils — on bailiffs to collect debts. They argued that local councils should exhaust all other options before calling on bailiffs.
Longer-term solutions: encouraging flexibility and improving policy
Beyond the urgent need to end intimidating bailiff practices, speakers drew attention to other reforms that need to be made to debts repayment practices and government policy.
All of the panel called for a more affordable approach to debt repayment. Lord Pickles stated that unaffordable repayment packages push people to the edge — which only contributes to problem debt and can make people turn to illegal or informal sources of lending as a last resort. Notably, our research has shown that people with mental health problems are particularly vulnerable to informal borrowing, which can strain existing relationships with the lender.
As a solution to repayments not being affordable, Joanna Elson argued that there is an opportunity for lenders to consider how much people are earning and what amount they can afford each month before they decide on repayments — this would make repayments more affordable to individuals based on their unique financial circumstances. And importantly, could be adjusted when financial circumstances change.
Simplifying the support needed:
In the context of the distress and uncertainty many face during the pandemic, it is clear that changes to help people facing problem debt are needed now, more than ever before. At Money and Mental Health, we believe the most important steps over the following months include:
- Tackling harmful debt collection practices, which not only includes reform of bailiffs’ practices, but making changes to remaining debt letters that continue to cause distress to those facing problem debt.
- Firms taking action to improve support customers facing problem debt, particularly those with mental health conditions. Through our Mental Health Accessible programme, we’ll be working with firms to help them improve their communications with customers experiencing poor mental health.
- Finally, boosting the income of people with mental health through policy solutions based around the employment market and benefits system. Our Mental Health and Income Commission will continue to work on this.