News

Debt drives depression, despair and suicide

Published 23 January 2013

The government must take urgent action to tackle the problem of irresponsible lending and intimidatory collection tactics which has left thousands of people trapped in a spiral of debt and at risk of depression and even suicide, according to a report released this week. The report adds that debt will have a major impact on public health in the context of caps and cuts of welfare incomes.

Responsible individuals and irresponsible institutions? Mental Health and the UK credit industry (1.5Mb pdf), published by the University of Brighton, is being launched today by Baroness Meacher of Spitalfields at the House of Lords.

The event, organised by, Zacchaeus 2000 Trust who work with impoverished debtors, focuses on the relationship between personal debt and mental health.

The university's report sheds light on the long-term social and health costs of the culture of irresponsible lending which has grown over the last few years as household incomes have fallen due to wage freezes, rising inflation and benefits cuts.

Dr Paul Hanna, Dr Carl Walker and Liz Cunningham from the School of Applied Social Science

The report is based on in-depth interviews with debt counsellors/advisors from the community and voluntary sector, debt clients, employees and former employees recruited from the finance sector, including high street banks, and a range of other relevant stakeholders.

It revealed that debt problems tend to be the result of unexpected life events, rather than irrational spending. Those who are in debt are no more likely to spend irrationally than the general public, but they are often on very low incomes, it said. It also identified that while education around debt management might be worthwhile, "it fails to address the problems of incomes and standards of living which often drive the use and over use of personal credit".

It said "a deeply problematic culture of irresponsible lending" has become widespread across the financial sector in recent years and includes practices of cold-calling customers in order to try to sell them credit, often under the guise of introducing services or assessing customers' needs.

It added that those in debt found themselves party to "distressing and persistent collection tactics that frequently constituted abuse". Debtors described being bullied, patronised and harassed and that nothing that they could say or do would alter these practices of "brutality".

The report said the processes of debt collection had a clear impact on people's mental health including experiences of despair, depression, suicidal thoughts and what was frequently referred to as 'breakdown'.

The report called on the government and regulators to take more interventionist approaches to the problems of living wages, irresponsible lending practices and collecting practices.

It concluded: "Without such work the multiple problems of over-indebtedness, and the associated mental health costs, cannot be effectively addressed."

It also backed calls for a rescue package for indebted households comprising a requirement for banks to partially write off outstanding household debt and reschedule the remainder over a longer term and it called for credit unions to be expanded through the post office network in order to provide a long-term alternative to high street banks.

Dr Carl Walker from the University of Brighton's School of Applied Social Science, said: "Our research has revealed a deeply problematic culture of irresponsible lending, with people being routinely provided with lines of credit far beyond any possible capacity to repay. We hope that it will inform the development of improved policies and regulations for debt collection agencies and companies, in order to protect vulnerable debtors and customers in the future."

Joanna Kennedy, Chief Executive of the Zacchaeus 200 Trust, said: "We deal everyday with low income households, both working and non-working, who struggle to meet their basic cost of living. The recent and upcoming welfare reforms have reduced and will reduce the incomes of these households even further at a time when the cost of essentials like rent, transport, food and energy are rising faster than inflation. The Government needs to develop, as soon as possible, a strategy to tackle debt, credit and financial inclusion. We hope the Government uses this report as a basis to improve the systems for protecting vulnerable debtors."