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Rules around ‘thuggish’ debt letters to be overhauled

Vicky Shaw, PA Personal Finance Correspondent
·3-min read

The tone and language used in letters chasing people for debts will become less threatening and more supportive, under Government plans to change decades-old rules.

The harm caused by distressing debt letters has been highlighted by charity the Money and Mental Health Policy Institute, which has been pushing for an overhaul.

Its research has previously found such letters can have a catastrophic impact on people with debt problems.

Money and Mental Health was set up by consumer champion Martin Lewis, who said the planned changes could save lives.

Default notices are designed to give people who are falling behind on their debts fair warning before lenders take further action, but much of their formatting and content has not been updated for around 40 years.

The Government will legislate to change the language and presentation of information in debt letters, cutting legal jargon and replacing it with more widely-understood language and signposting to free sources of debt advice.

Bold or underlined text will be used instead of capital letters, to make letters less threatening in their appearance.

The changes will be made when such letters relate to regulated consumer credit agreements, such as credit cards, personal loans, overdrafts and motor finance.

Previous research by Money and Mental Health found that receiving threatening letters from multiple lenders on a daily basis leaves people in huge distress and unable to see a solution to their situation.

Martin Lewis
Consumer champion Martin Lewis said ‘thuggish’ letters are the last thing people struggling with debt need (Steve Parsons/PA)

Martin Lewis, founder and chairman of the Money and Mental Health Policy Institute charity said: “It’s no exaggeration to say that this change could save lives.

“Over 100,000 in England attempt to take their lives each year due to debts, and four times that consider it.

“So 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.

“Today’s changes will make the most distressing debt letters much less intimidating, and crucially will also easily and calmly point people in serious debt to get the free, non-profit, debt advice they need.”

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.

Eric Leenders, managing director, personal finance at UK Finance said: “The banking and finance industry understands the impact that debt can have on a customer’s wellbeing and has been working closely with Government to help support customers, especially those in vulnerable circumstances.

“Lenders have to send default notices and these important changes announced today will ensure that customers receive more appropriate and supportive communications.”

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.

“Some vital work has been done by charities, the industry and the Money and Mental Health Policy Institute and I am grateful for their support in tackling this important issue.”