In a victory for campaign groups, the Government has agreed that lenders and collection firms can use less threatening wording on the debt collection communications they send to borrowers in arrears. The format and content of these communications have scarcely been altered since the original Consumer Credit Act of 1974.
The very fact that lenders and debt collectors are legally obliged to remind borrowers about unpaid debts has led many a customer to accuse their lender of harassing them. Campaign groups have also long argued that the consumer credit legislation requires certain stark language to be included in these communications and that this is adding to borrowers’ stress and anxiety, and in extreme cases, is even leading to an increase in the number of indebted borrowers taking their own lives.
The new rules will be delivered via secondary legislation and so will happen relatively quickly. They are expected to be in force by December 2020, and firms will then have six months to make the necessary changes to the letters they send out.
It is also understood that the letters will now use more accessible language, in place of some of the legal terminology, and that the communications will also signpost borrowers to sources of free debt advice. For example, firms will need to explain the meaning of the term ‘surety’, where they choose to use it and will use bold and underlined text to highlight key information, instead of block capitals.
The changes will not apply to debts such as council tax, utility arrears, tax debts or benefit overpayments, but will apply to everything that falls under the Financial Conduct Authority’s consumer credit regulatory regime.
John Glen MP, 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.”
Martin Lewis is probably best known as the founder of the MoneySavingExpert website, but he is also founder and chair of the Money and Mental Health Policy Institute charity, which is one of the organisations which has campaigned vigorously for changes in this area.
Mr Lewis 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 amount 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 a language they can’t understand, written in shouty capitals alongside threats of court action.”
Eric Leenders, managing director, personal finance at trade association 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 the government to help support customers, especially those in vulnerable circumstances.
“Lenders have to send default notices and these important changes ensure customers receive more appropriate and supportive communications.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article. Contact Scott Robert for further help or advice.