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Debt letters to be less threatening

Emma Lunn
Written By:
Emma Lunn

Warning letters sent to people in debt trouble are to be toned down to make them less intimidating, under government plans.

The letters borrowers receive from their lenders when they are seriously behind on debt repayments will be easier to understand and less scary, under new rules proposed by the Treasury.

Default Notices are designed to give people who are falling behind on their debts warning before lenders take further action.

But the format and content of the letters has not been updated in nearly 40 years.

Research by the Money and Mental Health Policy Institute and debt charities has shown that large amounts of capitalised text and legal terms can make the information contained in the letters hard to understand.

This confuses and distresses people, and has a negative impact on their mental health as well as their ability to effectively manage their debt.

The government now plans to legislate to change the language and presentation of information in debt letters.

The new rules will make debt letters less threatening by restricting the amount of information that must be made prominent and requiring lenders to use bold or underlined text rather than capital letters.

Lenders will also now be able to replace legal terms with more widely understood words, and letters will clearly signpost people to the best sources of free debt advice.

John Glen, economic secretary to the Treasury, says: “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, founder and chair of the Money and Mental Health Policy Institute charity, says: “It’s no exaggeration to say that this change could save lives. Over 100,000 people 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.”

These new rules are the latest in a package of support put in place to help people struggling with their finances, especially through coronavirus.

This includes £38m of extra funding to debt advice providers this year, and payment holidays for people struggling to pay their mortgage or other debts during the pandemic.

The new rules will be delivered through secondary legislation and are expected to come into force in December 2020. All lenders will then be required to make the changes within six months.