Borrowers on payment holidays to receive ‘thuggish’ debt letters

Millions households that have taken payment holidays on their or other debt during the pandemic are likely to receive “thuggish” debt threat letters in coming weeks as lenders are legally required to issue the warnings.

Martin Lewis, the TV presenter and chair of the and Mental Health Policy Institute, is behind a campaign to halt the threatening letters, which stem from rules in the Consumer Credit Act (1974) that compel lenders to send a warning once a borrower has failed to make two payments in a row.

Lewis said: “The fact that lenders are forced by a decades-old law to send thuggish letters to people with debt problems is staggering. These letters ruin lives, and many lenders say they don’t want to send them but the law gives them no option.

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“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 legislation demands that lenders’ debt letters include what Lewis describs as “complex and intimidating text”, which is capitalised and in bold.

Some lenders have taken steps to circumvent the rules with “wraparound” letters that tell borrowers they can ignore the letters lenders are legally obliged to send. Nationwide building society told payment holiday applicants at the outset of the coronavirus crisis that the warning letters would be sent, but could be safely ignored. But borrowers from other institutions might be distressed and intimidated when the threatening letters arrived, said Lewis.

Even those who have never had financial problems but have been granted mortgage or other official payment holidays, should by law receive one of these “frightening” letters after two missed payments, Lewis said. His charity said the regulatory authorities were looking to work around this law, “but this will clearly cause unnecessary distress and confusion”.

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The letters also give out-of-date advice, the charity said. Currently the legally mandated warning says, in bold and in capitals: “IF YOU ARE NOT SURE WHAT TO DO, YOU SHOULD GET HELP AS SOON AS POSSIBLE. FOR EXAMPLE YOU SHOULD CONTACT A SOLICITOR, YOUR LOCAL TRADING STANDARDS DEPARTMENT OR YOUR NEAREST CITIZENS’ ADVICE BUREAU.”

But the correct advice for many people struggling with debt is not to go to a solicitor but to contact one of the many free debt advisers, mostly charities, that can help with putting together a repayment plan.

The charity is calling on the government to update the advice by urgently amending the 1974 Act, and to change the tone and style of debt warnings.

It said its research indicated that in England, as many as 100,000 people in problem debt considered taking their own lives each year, and that the debt letters were a key contributing factor.

Lewis added: “At such a sensitive stressful time, the government needs to 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.”

UK Finance, which represents Britain’s banks, said it recognised that the wording of statutory notices was dated and could lead to customer distress, in particular where alternative arrangements had been agreed with the customer, but it confirmed that the law required the notices to be sent.

 A spokesperson said: “Lenders want to support customers who might be facing financial difficulty, and at the same time must comply with the legal requirements regarding debt collection – which includes using specific wording in any customer correspondence.

 “The industry recognises that the current requirements can be confusing and offputting, especially when customers and lenders have agreed changes to contractual payments, which is why we support changes to the legislation in this area.”

 In the UK and Irish Republic contact Samaritans on 116 123 or email

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