Calls for end to ‘thuggish’ debt letters as Covid-19 cash crisis bites

People in debt could still face “thuggish” threatening letters demanding they repay cash despite being given a payment holiday by lenders, says finance guru Martin Lewis as he warned that the time is now to “Stop the Debt Threats”.

The long-running campaign, spearheaded by the Money and Mental Health Policy Institute (MMHPI), has called for letters demanding cash sent under the Consumer Credit Act 1974 to be axed, citing the impact they have on mental health.

The institute has found that 100,000 people in problem debt attempt suicide every year with the letters acting as a key contributing factor.

Watch our Chair and Founder @MartinSLewis explain why it’s so important that the government takes action to stop the #DebtThreats – and lend your support by signing our petition here: https://t.co/vSRq1DJCMwpic.twitter.com/PfCK1jpeHx

— Money and Mental Health (@mmhpi) June 3, 2020

That’s why they have been campaigning to make the threatening wording a thing of the past, but today Lewis points out that, with many facing financial hardship due to the Covid-19 pandemic and the lockdown and uncertainty also straining mental health, action is needed now.

“The fact that lenders are forced by a decades-old law to send thuggish letters to people with debt problems is staggering,” said Lewis. “These letters ruin lives, and many lenders say they don’t want to send them, but the law gives them no option.

“In the next few weeks, we’ll have the perverse situation where lenders will be compelled to send threatening letters to millions of people, even if they’ve been given permission for a temporary break from debt repayments. That will cause distress and confusion at a time when people in financial hardship, and many struggling with mental health issues, least need it.

“The government has put support systems in place covering a chunk of the population. Yet at such a sensitive stressful time, it needs to change the rules on debt letters. It’s a simple change to get rid of a rule that benefits neither lender, borrower, nor the economy — and at this time, without exaggeration, it could save lives.”

While the Covid-19 pandemic continues to affect jobs and the economy, many people in debt have been granted a temporary payment holiday on mortgages, credit cards and loans.

But, by law, even those who have never had financial problems should receive one of these letters after missing two payments.

The letter features the following text in capitalised and bold font: “IF YOU DO NOT TAKE THE ACTION REQUIRED BY THIS NOTICE BEFORE THE DATE SHOWN THEN THE FURTHER ACTION SET OUT BELOW MAY BE TAKEN AGAINST YOU [OR A SURETY].”

With thousands of people set to fall into debt off the back of the pandemic, the MMHPI are urging the Government to update rules in the Consumer Credit Act to make the letters less threatening, insisting that even small changes could save lives.

The regulatory authorities are currently looking to work around this law with a UK Finance spokesperson saying the letter were “confusing and offputting” and confirming that they support a legislative change.

A Treasury spokesperson said: “It’s vitally important that banks communicate with their customers about debt so they can be supported to manage their finances. However, we are aware of the concerns raised and are looking into the issue carefully.”