The problem of personal debt and mental health

There appears to be a consensus that personal debt, and indeed over-indebtedness, in the UK is a growing problem. The Citizens Advice Bureaux in England and Wales dealt with 8,465 new debt problems every working day during the year ending June 2012 (Creditaction, 2012). Recent years have evidenced a steady stagnation in real terms wages and recent research suggests that the main cause for falling into debt has been a fall in household income. 

While worry about the implications of over-indebtedness (eg. failure to be able to maintain payment for essential living expenses, such as food, rent and bills) is clearly important, it is also clear from our data that debt clients frequently feel humiliated, disconnected and entrapped, with the processes of debt collection having a clear impact on people’s mental health.

This research project analysis drew on data collected from a range of stakeholders in the UK credit industry. 

Project aims

The analysis was structured around seven key themes:

  • dominant understandings in the UK credit industry
  • practices and cultures of lending
  • practices and cultures of collecting
  • debt and mental health; good practice
  • advice agencies; individual needs and future consumers.

Project impact

From the findings of this research it appears there are two fundamental concerns that characterise the issue of personal debt in recent years: firstly, the seemingly inventible rise of over-indebtedness, and perhaps more importantly the nature of the mental health difficulties associated with such financial strain.

This project has drawn on research that suggests a growing number of people are drawn into the necessary use of personal credit, not least as a result of stagnating wages and unexpected life events in recent years. More people appear to be in need of personal credit and become over-indebted as a direct result of using credit for everyday living costs. This need for personal credit, together with a change in public norms that regulate how we understand personal debt, changes in financial deregulation and the growth of the assets based securities markets, have likely contributed to a culture of lending, and remuneration for lending, aimed at aggressing selling and sometimes mis-selling of mainstream credit.

The process of debt collection has a clear and profound impact on people’s mental health.

Debt-and-Mental-Health-Report-cover

Download the full report – Responsible individuals and irresponsible institutions? A report into mental health and the UK credit industry

Research team

Dr Carl Walker

Liz Cunningham

Paul Hanna 

Peter Ambrose

Output

Responsible individuals and irresponsible institutions? A report into mental health and the UK credit industry full report

Partners