Mental cost of debt must be addressed

21 June 2010

My eye was drawn to a story last week which shows how the financial services industry sometimes forgets the catastrophic effect debt can have on mental health, as well as the financial damage it causes.

A man committed suicide by setting fire to himself because he was depressed about his debts. Any loss of life is a tragedy, and that debt should cause such anguish is terrible.

We are all aware of the effects of alcohol, gambling and drugs on the psyche. What’s not had much airtime is the effect of debt.

Some might argue that taking account of a customer’s state of mind is not the role of a lender but I would argue that it has a great deal to do with successful arrears management and needs to be taken seriously.

We are trialling an arrears assistance programme with some lenders, talking to consumers not only about their arrears but their whole financial situation. The results we are achieving with delinquent accounts by helping clients to restructure their finances are proving beneficial.

The future of successful arrears management rests on recognising that arrears are just part of a customer’s financial situation.

By concentrating on gaining clients’ trust and helping them restructure their finances, first and second charge arrears can be brought under control effectively, providing results for lenders and financial and mental relief for clients.

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