Public sector debt collection and psychological harm: our upcoming research

Many of us rely on the vital support of public services and local government – whether that’s your local council for social care or housing, or the Department for Work and Pensions for work-related benefit payments, for example. 

But we also make payments to these public sector bodies which help keep services running, such as council tax, the TV licence fee, income tax or parking fines. 

So what’s it like when we fall behind on these payments, and debt collection action to recover arrears begins? Well, that’s what our upcoming research on the psychological harm caused by public sector debt collection will dig into.

This research is the second instalment of our ongoing work in collaboration with the abrdn Financial Fairness Trust on the debt collection landscape across different sectors. This follows the publication, at the end of last year, of our report Debts and Despair, which looked at people’s experiences of constant and harassing collections communications in the consumer credit sector. In that report we called for an overall limit to be placed on the amount of contact creditors could have with their customers in arrears. 

We’re already making positive headway on this. The Financial Conduct Authority committed to look into this important issue at our report launch event, and the UK Regulators Network (UKRN) released a letter that echoed our call for creditors to reduce the frequency of distressing collections communications.

But despite these early successes, there’s still a long way to go to tackle the substantial harm caused by aggressive and insensitive debt collection practices.

Public sector creditors are another key player in people’s experiences of this harm. That’s why our upcoming research will turn the spotlight onto the debt collection practices of the public sector, namely local authorities and central government. 

With the impacts of the cost of living crisis persisting, paying even the highest priority bills to public sector bodies, such as council tax or overpaid tax credits, has become harder than ever. 

As a result, the risk of psychological harm from debt collection in this sector is escalating.

Our upcoming report will dive into the impacts of a full range of debt collection powers available to public sector bodies – from obscure court processes like liability orders, to tactics that undermine our financial security like attachments of earnings and benefits deductions, enforcement activity, involuntary bankruptcy and even imprisonment. 

We’ll accompany this with new national dataset analysis, and learnings from a roundtable event we held, attended by over 65 stakeholders from local and national government.

Our Research Community – a group of 5,000 people with lived experience of mental health problems – tell us time and again how important this issue is. As always, their testimony will be at the heart of this work.

Ultimately, we want to see a world in which debt collection practices across all sectors are fairer and less harmful for all of us, but especially for those of us with mental health problems – given the disproportionate risk of harm facing this group.

With the publication of this report in the autumn, we’ll be sharing our findings in full and making a series of recommendations to raise the standards for fair debt collection across the public sector.