Debt Collection Letters

Debate between Hugh Gaffney and Norman Lamb

Tuesday 21st May 2019 Westminster Hall

[Norman Lamb (North Norfolk) (LD)]

I beg to move,

That this House has considered the content of debt collection letters.

It is a pleasure to serve under your chairmanship, Sir Graham. I have been working with the charity the Money and Mental Health Policy Institute. I sit on its advisory board, along with hon. Members from other parties, including the hon. Members for Plymouth, Moor View (Johnny Mercer) and for Liverpool, Wavertree (Luciana Berger). It was set up in 2016 by Martin Lewis from Money Saving Expert. Money and Mental Health has been conducting valuable research into the link between financial difficulty and mental ill health, and leading campaigns to bring about reform where it identifies a problem.

The link between debt and mental ill health is striking. People with mental health problems are three times more likely to be in problem debt as those without mental health problems. Half of adults in problem debt have a mental health problem. Research by Money and Mental Health found that in England each year, more than 100,000 people in problem debt attempt to take their own life and more than 420,000 people in debt consider suicide. This is an incredibly serious issue.

Several factors contribute to that link between financial difficulty and mental ill health, but one important issue—the subject of this debate—is debt collection letters. They are written in a way that can make people feel that there is no way out of their financial problems, sometimes leading to disastrous and fatal consequences. I will give a couple of brief case studies.

Paul lives with bipolar. Throughout his life he has suffered from mental ill health, which has been compounded by debt problems. When he was on a high, he would go out on spending sprees funded by loans; during periods of depression, he would struggle to pay his bills and often spend money to make himself feel better—it was a sort of escape from the nightmare and trauma he was going through.

Paul said that being hounded by creditors left him feeling trapped and helpless. He tragically made attempts on his own life. Like so many others in debt, Paul received letters from lenders, which are intimidating, often written in complex language and can feature threats of court action right at the top, very prominently. Sometimes people receive such letters from multiple lenders on a daily basis, leaving them feeling trapped in the nightmare engulfing them. Paul says,

“the letters that you get from creditors are horrendous. They were like someone standing in front of me with a knife, so I wanted to get rid of them. I’d just put them straight in the bin or burn them…You feel trapped by your debt, and that you can’t get out—that’s what can drive people to feel suicidal”.

Thankfully, Paul is now in a much better place with support from his family.

I have witnessed people who, when confronted by letters demanding payment, hide away and do not confront the problem, because of the state of their mental health. Sometimes they put letters into cupboards, hoping that the problem will go away. Of course, it does not go away and in many cases the debt escalates, making the situation even worse.

Jerome Rogers sadly took his own life at the age of 20 after receiving two £65 traffic fines, which escalated to £1,000 of debt after the council passed on his debt to aggressive bailiffs. Jerome’s mother Tracey believes that a big factor in his death was a combination of the threatening bailiffs who came to the door and the intimidating letters he received from lenders. Tracey says that if the letters had not been so frightening and Jerome had been able to get the right support when he needed it, he would still be here today. That is one life tragically lost, but there will be many others.

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

The right hon. Gentleman gave two powerful examples. This is reality. This is life. People are getting these letters and thinking about committing suicide. After a decade of austerity, things are not improving. Does he agree that it is time that the Government gave new guidelines to stop these letters coming through the door and threatening people? We need to examine this more and I therefore welcome this debate.

[Norman Lamb]

The hon. Gentleman goes to the heart of what I am proposing. I will expand on the point he made.

Debt collection letters, like the ones received by Paul and Jerome, often include complex text, which is capitalised and put in bold. The language can be intimidating to someone experiencing mental ill health. The letters often start with threats of court action. They do contain advice—the purpose is well meaning in terms of the legislative requirements.

However, the wording they are required to use is inaccurate and out of date. It was devised before free debt advice was widely available. Recipients are told to get help from a solicitor, from their local trading standards department or a citizens advice bureau. However, trading standards can only help someone when a company’s behaviour is illegal, not in an ordinary civil situation. Therefore, that advice, in wording required by the Government, is inaccurate and should not be there.

The idea that someone in problem debt should be told in official advice to seek out a solicitor is outdated and frankly ridiculous for many people who would just assume that going to a solicitor is impossible, due to the cost involved. The advice is so out of date because, outrageously, the content of these letters is dictated by legislation that has not been updated for decades. Lenders are legally obliged to include certain pieces of prescribed content, as is laid out in the Consumer Credit Act 1974 and the Consumer Credit (Enforcement, Default and Termination Notices) Regulations 1983.

The Money and Mental Health Policy Institute’s “Stop the #DebtThreats” campaign calls on the Government to amend the Consumer Credit Act and the associated regulations, to put a stop to the threatening letters. First, the Government should change the prescribed content of lenders’ letters, exactly as the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney) suggested. The Government should make these letters more accessible, easier to understand and clearer for people in problem debt.

If the Minister is tempted to say that he is supportive of the principle involved here, but it involves a comprehensive review of the Consumer Credit Act and the whole thing will take a long time, I do not buy it. There is clearly a case for a review of the primary legislation, but the wording of the letter, which is out of date and inappropriate, could be changed quickly through regulations. There is a real danger that we overcomplicate this. Those regulations could be made in a straightforward way quickly, pending a wider review of how we deal with these issues. One sensible idea is to refer the matter across to the Financial Conduct Authority. The step could be taken immediately to get rid of the inappropriate and inaccurate prescribed wording, which simply should not be there and makes things more difficult for people.