New research published today by the Money and Mental Health Policy Institute is urgently calling on the government to introduce clear rules to stop lenders inundating people with letters, calls, texts and emails about missed payments.
Money and Mental Health says this is causing unnecessary distress at a time when 50% of people who are behind on bills say they have experienced suicidal thoughts or feelings in the past 20 months due to rising costs.
The research looks at people’s experiences of falling behind on consumer credit payments, such as credit cards and buy-now-pay-later payments, since February 2022. It features new nationally representative YouGov polling of 2,069 UK adults, which shows that:
- 1 in 10 UK adults (10%) are currently behind on consumer credit payments. If reflected nationally, that equates to 5.2 million in total — an increase of 1.5 million since November 2022.
- 1 in 4 (24%) people who have missed payments are contacted by their creditors every 1-2 days — while some people with multiple debts who spoke to the charity for the research say they are receiving several letters, emails or calls each day.
- Nearly half of people who are behind on payments say they feel harassed (49%) or overwhelmed (48%) by the volume of contact they receive from their creditors. At the national level, this amounts to 2.5 million people who say that they feel harassed by the frequency of contacts they receive from their creditors.
- The harassment people feel increases in line with the number of messages that they receive from creditors. For example, 86% of people who receive five or more letters or emails each month said they felt harassed — approaching double the share among people who received 4 or fewer (47%).
- The more contacts that people receive from creditors, the more likely they are to say that this contact had a negative impact on their mental health. 91% of people who received five or more phone calls a month from lenders said that this contact had negatively impacted their mental health, compared to 57% for people receiving four or less calls.
The consequences of too many contacts can be severe
Money and Mental Health is raising the alarm about the unnecessary harm this is causing at a time when many people are already experiencing serious distress due to the rising cost of living. Half (50%) of people who are behind on consumer credit payments say they have had suicidal thoughts or feelings in the last 20 months due to rising costs.
Alongside the polling, Money and Mental Health undertook an in-depth survey of 264 people with mental health problems (2).
Survey respondents reported feeling bombarded and harassed by the volume of contacts they receive about missed payments. Suicidality is complex and preventable, and there is rarely one specific factor that causes people to feel suicidal. But some survey participants said that the frequency of contacts they received from creditors contributed to them having suicidal feelings. In some cases, people even say it contributed to them attempting to take their own life. 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. When my debts were passed on to debt collection agencies, the negative impacts on my mental health were multiplied by 10 times… I made four serious suicide attempts as I could not see any other way out of the debts I had incurred.”
Current guidance from the Financial Conduct Authority (FCA) — which regulates financial services — states creditors should not contact people ‘at unreasonable intervals’, but fails to stipulate a specific limit.
The UK is lagging behind other countries in this respect. For example, in the United States, creditors are only allowed to call debtors seven times in one week. The charity argues this is still too often, but provides a level of protection that people in the UK do not enjoy.
Making it worse, creditors can access data from credit reference agencies to see a fuller picture of a customer’s arrears across different financial products, but are not obliged to do so under FCA rules. This means they do not have to consider that customers are receiving a high volume of calls from other agencies too.
What Money and Mental Health is calling for
In 2020, Money and Mental Health successfully persuaded the government to change out-of-date rules that forced lenders to send intimidating debt letters to people in arrears. Now, the charity is calling on the government and regulators to take two key steps to reduce the distress people in arrears are experiencing:
- The government should task the FCA with placing limits on how often creditors can contact people about missed payments. In particular, the FCA should use its powers to 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.
It should then develop clear limits on how often lenders can contact people in debt, drawing on the insights from its review. Money and Mental Health’s analysis lacks the depth of data that an FCA enquiry would have, but its provisional insight is that there seems to be a tipping point when people receive five or more letters and emails each month from all their creditors — at which point 86% of people say they feel harassed, compared to just 47% of those who received 4 or fewer. - The FCA should mandate creditors to use data to identify where customers are behind on multiple credit payments before contacting them. 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.
That could include limiting how often they chase a customer about overdue payments, and making referrals to debt advice or specialist teams.
Commenting on the research Martin Lewis, Founder, Chair and core funder of the Money and Mental Health Policy Institute, said:
“While we understand that creditors have a right to contact those who owe them money, it has to be done with a recognition that mental health issues and debt crisis sadly, strongly, feed off each other.”
“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.
“That’s terrible for the individual, poor for the economy as exacerbating mental health issues adds costs to the economy, and it’s unlikely to improve the chances of creditors getting money back either.
“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.
“The concern is heightened due to the cost of living crisis, a time when half of people who are behind on bills say they have felt suicidal too. Our message to the government and regulators is simple. We need urgent action to prevent creating more unnecessary distress for people who are already under massive strain.”
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. But only the FCA and creditors can access data which shows the fuller picture of how many contacts people get when they’re behind on multiple bills, so they are in a unique position to act. Given the harm this issue is causing, we want the FCA to investigate this as a matter of urgency, identify where that tipping point is and to put in place clear rules for creditors on how many messages is too much.”
Mubin Haq, CEO of abrdn Financial Fairness Trust, an independent charitable trust and a funder of the research, said:
“With incomes stagnant, consumer credit is continuing to prop up household finances and, worryingly, more of us are getting into difficulties with credit. But 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.”