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Martin Lewis calls for law change to stop “threatening” debt collection letters

Consumer campaigner Martin Lewis is urging the government to change legislation that forces lenders to send debt collection letters to customers – when those borrowers have already been given payment holidays.

As founder of the Money and Mental Health Policy Institute, Lewis is demanding that the government make urgent changes to the 1974 Consumer Credit Act, which has no caveat to enable lenders to stop sending debt letters to people granted payment breaks.


Lewis is campaigning on the issue after the institute’s study found that more than 100,000 people in problem debt attempt suicide each year in England, and that these “intimidating debt letters are a key contributing factor”.


He said: “The fact 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.


“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.”


While the credit industry’s own trade bodies have lobbied on similar issues with the Act before, Lewis has now said the government needs to make the changes as part of its support measures for consumers affected financially by Covid-19.


The founder of MoneySavingExpert claimed the letters often contain “threatening and confusing language, often alongside threats of court action”.


As an example, the Money and Mental Health Policy Institute highlighted paragraphs that state points such as: “If you do not take the action required by this notice before the date shown then the further action set out below may be taken against you [or a surety].”


Some consumers, the institute added, are receiving the letters from multiple lenders on a daily basis, leaving them in huge distress.


The institute warned this issue will escalate during the coronavirus crisis for two reasons:

  • Many people have been granted a temporary debt repayment ‘holiday’ by lenders, in which they don’t need to make repayments on mortgages, credit cards and loans. But lenders are still forced by law to send “intimidating” debt letters to anyone they consider to be in arrears in this period — even if they have been granted a payment holiday.
  • 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 letters after two missed payments. The institute noted that regulatory authorities are currently looking to work around this law, but this will clearly cause unnecessary distress and confusion.

The institute’s Stop the Debt Threats campaign is urging the government to update rules in the Consumer Credit Act that dictate the content of debt letters.


Responding to the campaign, a UK Finance 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 off-putting, especially when customers and lenders have agreed changes to contractual payments, which is why we support changes to the legislation in this area.


“Whilst the legal documentation might be challenging, we would always encourage customers to speak to their lender or an authorised debt charity if they are worried about their money.”

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