Credit Management July and August 2020

CMNEWS
A round-up of news stories from the
world of consumer and commercial credit.
Written by – Sean Feast FCICM
‘New’ campaign calls for
end to ‘thuggish’ letters
THE Money and Mental Health
Policy Institute has called
for changes to what it calls
‘thuggish debt letters’ being
sent to vulnerable customers during the
COVID-19 crisis.
Research by the charity suggests that
more than 100,000 people in problem debt
attempt suicide each year in England,
and that intimidating letters are a key
contributing factor.
Martin Lewis, Founder and Chair of the
Institute says that lenders are forced by a
decades-old law to send thuggish letters
to people with debt problems: “These
letters ruin lives, and many lenders say
they don’t want to send them, but the law
gives them no option,” he explains.
“In the next few weeks, we’ll have the
perverse situation where lenders will be
compelled to send threatening letters to
millions of people, even if they’ve been
given permission for a temporary break
from debt repayments. That will cause
distress and confusion at a time when
people in financial hardship, and many
struggling with mental health issues,
least need it.”
The government, he says, needs to put
support systems in place and change the
rules on debt letters: “It’s a simple change
to get rid of a rule that benefits neither
lender, borrower, nor the economy — and
at this time, without exaggeration it could
save lives.”
The MMHPI claims that legislation
demands that certain letters must
include often complex and intimidating
text in full when people are seriously
behind on payments — and that this
should be capitalised or in bold text.
The text warns customers of the
consequences of failing to take action,
and the penalties that may follow.
Peter Wallwork, Chief Executive of
the Credit Services Association, says his
members would also like to see change,
but doubted such change would be
‘simple’: “While the majority of letters our
members send are customer-oriented,
and very clearly supportive, the statutory
letters have to use prescribed language,
phrases and words that every company
has to include,” he explains.
“Current legislation simply does
not allow for formal notices that are
flexible or dynamic enough, despite CSA
members’ attempts to manage the way
they are read, to provide meaningful
information to a customer and to address
any vulnerabilities throughout the life
cycle of a debt. It is pleasing to see the
new campaign targeting the regulator
and the government, for change will
require primary legislation. We will
happily support the debt advice sector
and other stakeholders in seeking
a reasoned approach to making the
changes that are really needed.”
Sue Chapple, Interim Chief Executive of
the CICM, is similarly supportive, but says
that the issue is hardly new: “Whereas
we welcome the interjection of Mr Lewis
and his campaign, this is a long-running
saga that has vexed many in our industry
for some years and it is important that
the government and the FCA are now not
‘bounced’ into an action with unintended
consequences.
“The debt collection industry, under
the auspices of the CSA, has been doing
vital work in this area, and we have
warned previously of the need for greater
flexibility in how debt purchasers and
debt collectors can communicate with
customers. It is ludicrous that some
creditors have been having to send
'wraparound' letters telling a customer
to ignore the legal letter they are obliged
to send! Now more than ever, the focus
has to be on outcomes. Any changes to
current legislation must give creditors
the opportunity to simplify the message
and provide customers with clear and
consistent information across every
touchpoint about the help that is available
to them.”
Advancing the credit profession / www.cicm.com / July & August 2020 / PAGE 6