You are in the minority if you don't know someone who, at some stage in their life, has experienced some kind of mental health disorder.
One in four adults experiences at least one mental health issue in any given year according to NHS statistics.
Add to that the 800,000 people suffering from varying degrees of dementia (a figure which itself is expected to double in the next forty years) and it is clear why so many people struggle to cope with everyday life – including dealing with their finances.
Unfortunately, the manner in which some creditors pursue debts can often exacerbate the problem or, even worse, cause a mental health episode.
The links between debt and mental health problems and how one can lead to the other are well documented.
Slowly but surely the stigma previously associated with mental health issues is disappearing.
As such, responsible creditors such as public sector organisations and businesses recovering trade debt from individuals should have processes for dealing appropriately with the issue.
The ideal is that the mental health of the person who owes the money is not impacted adversely by the process but that the debt is recovered successfully.
The Financial Conduct Authority (FCA) regulates how lenders should approach the recovery of debt in these circumstances through various checks and balances.
It regulates the conduct of more than 56,000 businesses. This could go some way to explain the progress that has been made by banks and lenders in rolling out processes specifically in relation to dealing with people who may have mental health issues.
The FCA it does not cover all organisations that people may owe money to – significantly it doesn’t cover public sector organisations.
That said, this sector too is increasingly seeing the worth of introducing appropriate processes, with many adopting the excellent guidelines on debt and mental health developed by The Money Advice Liaison Group (MALG).
Creditors not regulated by the FCA would do well to follow its guidelines.
Although the required procedures initially seem quite complex and daunting, they can often result in a positive outcome, not just for the debtor, but also for the creditor.
Pursuing a debtor who does not have the mental capacity to deal with the issue through the courts could potentially have wider adverse implications.
While, recognising that mental health issues are often not long term means that using forbearance and consideration until a debtor recovers from an episode will usually result in the debt ultimately being paid.
Public sector organisations who follow the FCA or MALG guidelines can be assured that their actions are beyond criticism and their reputation safeguarded.
The recommended processes ultimately make sense.
The guidelines state that organisations should have a policy that ensures all staff in its collections team are aware of how vulnerable debtors should be dealt with.
Frontline collections staff should be given basic training on how to talk to debtors who they suspect may be suffering from a mental health problem.
For instance, our recoveries team at Morton Fraser all undertook a really helpful on-line course provided by MALG.
It is also recommended that a small specialist team is created (potentially outwith the frontline collections team) who can talk appropriately with debtors suffering from a mental health issue.
There is useful guidance by the Royal College of Psychiatrists for such teams which takes you through what questions to ask, how to use the information obtained without breaching Data Protection and what information should be provided to the debtor.
There are also useful tools like a Debt and Mental Health Evidence Form, created by MALG.
It would be completed by a health or social care professional to provide helpful evidence to creditors on how the particular mental health condition affects the debtor's ability to deal with debt and manage money.
It also provides creditors and their recovery agents with comfort that a debtor's claim is genuine.
Still not convinced?
The alternative is to turn a blind eye and just continue to seek recovery of the debt. But, in reality, what would this achieve? In all likelihood, the debt would remain unpaid!
If debtors are in payment arrangements and you don't engage with them when they find themselves in these unfortunate circumstances, it is probable they will stop making payments, leading to additional costs in negotiating a new arrangement.
But worst of all, you might actually make the debtor's mental health deteriorate further.
None of us want to be responsible for that, do we?
The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. Morton Fraser LLP accepts no responsibility for the content of any third party website to which this webpage refers. Morton Fraser LLP is authorised and regulated by the Financial Conduct Authority.