Lenders will no longer be allowed to send out “thuggish” debt recovery letters under new rules proposed by the Treasury following a campaign by TV money pundit Martin Lewis.
The Treasury said the use of “legalistic language and block capitals” in default notices will be restricted and that the letters will have to be easier to understand and less intimidating. Borrowers will also have to be told about where they can obtain free debt advice.
Currently lenders have to comply with a 1970s law that dictates the text of official default notices issued by the banks. Concerns about the format of the letters intensified after the introduction of mortgage holidays during the pandemic, when banks were forced to send the letters because the payment breaks were in effect a default. It prompted Nationwide building society to tell mortgage holiday applicants that they were forced to send the letters, but that they could be safely ignored.
A charity founded by Martin Lewis, the Money and Mental Health Policy Institute, warned in June that as many as 100,000 people in problem debt considered taking their own lives each year, and that the debt letters were a key contributing factor.
Lewis said: “It’s no exaggeration to say that this change could save lives. We’re delighted the government has agreed to back this element of our campaign and change the default demand rules. The last thing people struggling with debt need is a bunch of thuggish letters dropping through the letterbox, in language they can’t understand, written in shouty capitals alongside threats of court action.
“And the timing is crucial, with millions of people facing debt and distress due to the pandemic, the sooner we end these out-of-date laws which force lenders to send intimidating letters the better.”
In future, the letters will have to use more accessible, less threatening language. Complex or jargon terms will have to be explained in plain English, and the notices will no longer contain what Lewis described as “angry looking upper case letters”.
The new rules are expected to come into force in December 2020. All lenders will then be required to make the changes within six months.
John Glen, economic secretary to the Treasury, said: “Being behind on your credit repayments can be a really distressing experience which is made worse by a confusing and intimidating letter from your lender.
“As part of our effort to help to people struggling with their finances, it’s right that we look again at the legislation around these letters. These new rules will help to take the fear out of finance by ensuring that letters are easier to understand, less threatening, and empower people to take control of their finances.
Steve, 42, from Colchester, fell into debt after redundancy, just as his wife was expecting their second child.
“I managed to find a job that offered one day of work a week, but it was a real struggle financially. The bills were mounting up, we were falling behind on rent and council tax, and my wife and I were skipping meals several times a week in order to make sure the children had food.
“I started receiving letters from companies telling me to ‘pay now’ or warning that if we didn’t make a payment by a certain time, we could go to court, or someone could come to take our things.
“It’s stressful to open those letters, and to get them on a daily basis – it mounts up. Even for small amounts they tell you they’re going to send the bailiffs. Something as simple as rewording those letters, to make them less intimidating and let you know there is help and support out there, could make all the difference.
“It can be really hard to talk about financial problems when you’re struggling. You kind of go into your shell, close the curtains – which makes it hard to tell your bank. And if you talk to people about your debts, some people assume you’re there to beg for money – I think that’s why a lot of people don’t talk to their friends about their debt.”
In the UK and Ireland, Samaritans can be contacted on 116 123 or email firstname.lastname@example.org or email@example.com. In the US, the National Suicide Prevention Lifeline is 1-800-273-8255. In Australia, the crisis support service Lifeline is 13 11 14. Other international helplines can be found at www.befrienders.org.