Stronger rules are needed to prevent borrowers who are behind on their payments from being overwhelmed with correspondence chasing their debts, according to consumer champion Martin Lewis and the Money and Mental Health Policy Institute.
Research published by the institute, a charity founded and chaired by Mr Lewis, indicates that half (50%) of people who are behind on bills have experienced suicidal thoughts or feelings in the previous 20 months due to rising costs.
Mr Lewis said: “When done well, contact from creditors can help people to understand how much they owe and gives guidance and assurance about what they need to do next. But some people are being swamped with phone calls, texts and letters from multiple creditors a day – that leaves them feeling overwhelmed and harassed, feeling unable to ever escape the situation.”
The research, funded by the abrdn Financial Fairness Trust, involved a YouGov survey of more than 2,000 adults across the UK in October.
It looked at people’s experiences of falling behind on consumer credit payments, such as credit cards and buy-now-pay-later payments, since February 2022.
The survey indicated that one in 10 (10%) people are currently behind on consumer credit payments.
A quarter (24%) of those who have missed payments said they are contacted by their creditors every one to two days. Some people with multiple debts reported receiving several letters, emails or calls each day.
Nearly half of people who are behind on payments said they feel harassed (49%) or overwhelmed (48%) by the volume of contact they receive from creditors.
Nine in 10 (91%) people who received five or more phone calls a month from lenders said this contact had negatively affected their mental health.
Alongside the polling, Money and Mental Health undertook in-depth research among more than 260 people with mental health problems.
Some research participants said the frequency of contact they receive from creditors has contributed to them having suicidal feelings.
One participant said: “Phone calls, receipt of emails and letters demanding repayment sent my anxiety levels through the roof and increased the severity of my depression.”
Money and Mental Health said current guidance from the Financial Conduct Authority (FCA) – which regulates financial services – states creditors should not contact people “at unreasonable intervals”, but a specific limit is not set out.
In the US, for example, creditors are only allowed to call debtors seven times in one week, the charity said.
Money and Mental Health wants the Government to task the regulator with placing limits on how often creditors can contact people about missed payments.
Our evidence suggests that there is a tipping point where the volume of messages people get from creditors goes from being helpful to harmful— Conor D'Arcy, Money and Mental Health Policy Institute
The FCA should also launch an urgent review of this issue, requiring creditors to provide detailed data on how often they communicate with customers in arrears across the full range of communication channels, the charity said.
When lenders can see that someone is likely to be receiving a high volume of contacts from multiple creditors, they should be required to change their approach to that customer and to reduce the risk of distress, the charity said.
Mr Lewis added: “There’s no silver bullet for these issues, but stopping a never-ending overflow of messages to people about their missed payments would make a big difference in reducing the stress that too many people are under – hopefully helping them manage the situation better too.”
Conor D’Arcy, interim chief executive of the Money and Mental Health Policy Institute, said: “Our evidence suggests that there is a tipping point where the volume of messages people get from creditors goes from being helpful to harmful.”
Mubin Haq, chief executive of the abrdn Financial Fairness Trust, said: “There is a real risk that we are dangerously overloading people who are behind with their credit payments.
“High levels of contact from creditors are negatively impacting people’s mental health. Action is needed on a number of fronts and that includes placing legal limits on the number of times creditors can contact people about missed payments.”
A Government spokesman said: “We are committed to helping people escape problem debt and have invested a record £90 million to fund free debt advice in England.
“The Government’s Mental Health Crisis Breathing Space Scheme offers those experiencing a mental health crisis the space to receive their treatment without the pressure of creditors.
“We are also reforming the Consumer Credit Act to ensure protections afforded to consumers are fit for purpose and to improve how lenders communicate with those in financial difficulty.
“We also want to help people avoid getting into problem debt in the first place, and we are providing significant cost-of-living support worth on average £3,700 per household over the last three years.”
