Finance and Mental Health – getting credit and managing debts

Amanda Gillam
11th February, 2019
Ditching Debt

Financial difficulty and mental health are inextricably linked. Half of adults who have problem debt also have a mental health issue. It’s often unclear which came first, as either one can act as a trigger for the other. Although the benchmark is fairly low, lenders do have responsibilities when it comes to credit applications from those with mental health issues. There are also measures that have been put in place to help anyone who is suffering from mental health problems as well as struggling with debts.

The link between finance and mental health

Mental health issues are much more commonplace in the UK than many people realise. In fact, a quarter of the population is thought to be dealing with mental health difficulties at any one time. This could be something like anxiety or depression or a condition such as schizophrenia. There are strong links between financial problems and mental health. Getting into difficulties with debt is stressful and many people find it hard to see a way out. However, no debt problem is unsolvable.

Obligations on lenders

There are no legal obligations on lenders when it comes to consumers with mental health problems. However, a number of bodies within the industry have established guidelines in voluntary codes for their members, including:

The Lending Code (produced by the Finance and Leasing Association) requires that when lenders have been notified of a health issue (including mental health), they must take particular care. This includes being sensitive to a person’s condition and using appropriately trained staff to handle certain accounts.
The Credit Services Association (relevant to companies dealing with unpaid credit accounts) code of practice requires “due regard and to deal sensitively with people where evidence has been given, or is apparent, that the individual is incapacitated by mental or physical disability.”
The Money Advice Liaison Group guidelines set out specifically how a customer with mental health issues should be treated. These guidelines are recent and voluntary but indicate an industry shift towards taking factors such as this into account.
The Financial Conduct Authority (financial industry regulator) Consumer Credit source book requires lenders to have specific policies in place for customers who are in arrears and vulnerable, including where they have mental health difficulties.

Telling creditors about mental health issues

Most lenders have policies and guidelines in place to help them deal sensitively with customers who have mental health problems. Telling a lender about issues that you’re having may mean that you’re entitled to protection under the Equality Act 2010. It also gives your creditors a range of options when it comes to resolving the situation. For example, you can request that creditors contact you using a certain method at a specific time only, such as by letter or phone during the day. Creditors can also agree to suspend collections or to delay sending your case to a credit reference agency.

What can you do if you’re worried about debts?

Start by asking for help with debt. There are a wide range of free support services that provide advice and information to anyone who is struggling with debt. Christians Against Poverty and Citizens Advice are just two of the options.
If you’re facing an emergency situation then deal with that quickly. For example, if you are being chased by debt collectors, there are agreements in place that mean you can get relief from being pursued as long as you’re proactively trying to get help with your debt problems.
If you don’t feel like you’ve been fairly treated then make a complaint. The first step is to complain to the creditor or lender. If you don’t get a reasonable response then you can refer this to the Financial Ombudsman Service. For many people with mental health issues, a complaint is often made on the basis that they were not treated by the lender in accordance with the Lending Code’s guidance on mental health and debt.
Get to grips with your spending. Many of us are emotional spenders who will buy items to make ourselves feel better, often at times of stress or when we don’t feel good. It can be helpful to review how you spend money and whether unhealthy patterns of spending related to mental health issues, such as depression, have been contributing to debt problems.
Seek help for your mental health issues. There are many resources available for anyone with mental health issues – the first step is often to speak to your doctor to see what is available on the NHS for free.