1. Introduction
Mental health can impact a person’s ability to manage money, as it affects how they feel, think and act, and can influence their decision making, planning, spending behaviours, coping strategies and communication.
According to the Royal College of Psychiatrists, an estimated one in four adults living in the UK experience a mental health problem every year.1 When combined with financial difficulties, mental health problems can affect not only the individuals concerned, but also the organisations with which they have relationships (eg, debt advice agencies). Debt advisers and creditors are not trained to diagnose mental health problems and often do not understand the implications of mental health on a client’s ability to cope or engage with them. Many mental health conditions have no physical signs, and fluctuations in the severity and effects of an illness are common. In many cases, a creditor will not be aware that a person has a mental health issue until they have missed payments and the collections process has reached an advanced stage.
A lack of understanding of mental health issues, combined with process-driven procedures in large agencies, can lead to a lack of individualised support. Advisers should gain at least a basic awareness of mental health conditions so they can recognise when a client may need extra support. And once a creditor is aware of a client’s mental health issue, it should have practices and systems in place to take account of the situation, and should respond fairly and appropriately. Creditors should both assist people to make informed borrowing choices and themselves make informed and responsible lending decisions.
Useful guidance
The FCA’s Consumer Credit Sourcebook provides information on common potential causes of limited mental capacity2CONC 2.10.6G and specific indications that should alert a lender to a client’s condition.3CONC 2.10.8G – : Conduct of business standards: general
– : Arrears, default and recovery (including repossessions)
– : Debt advice