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Tuesday, February 18, 2020

Codes of Practice and Creditors Response to Problem Debts Due to Health Reasons


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Taking on debts is common these days to meet with the demands and high cost of living. Most people take on debts left, right and center without thinking about the consequences and eventually end up in a situation when they cannot make any further payments. This leads to added stress to their personal and professional life but most significantly this situation will lead to several health issues, physical and mental.


The creditors, no matter how bad you may think of them, often responds to the debt management issues faced by their customers, especially when they are facing serious health issues due to the burden of debt. However, they will strictly follow the codes of practices and will not go beyond their permissible limits to help you out.

Therefore, it is better that you know about these codes and act accordingly when you want to reduce your debts and get relief. Such knowledge will help you to go ahead with your debt management plan more confidently ensuring success.

Different rules and guidelines

All creditors will have to follow the rules and guidelines and these rules may vary according to the type of debts that you currently have. Here are a few examples of such codes of practice that creditors follow:

  • Credit cards and most of personal debts are typically governed by the Financial Conduct Authority, FCA. This agency monitors all activities of all financial organizations and from time to time set up specific rules and guidelines regarding how all creditors should treat their customers. The Consumer Credit sourcebook, CONC of FCA clearly mentions that all creditors must have in place and follow clear policies for customers who may have defaulted in their payments and are specifically most vulnerable. This includes those customers who suffer from mental health issues.
  • The creditors will also follow the principles and guidelines mentioned in The Standards of Lending Practice: Personal Customers when they deal with money owed by their customers on credit card debts, unsecured loans and overdrafts. These guidelines are much similar to the above CONC guidelines for dealing with customers who are vulnerable and have financial difficulty. They must treat their customers sympathetically and positively, according to the code of law.
  • If any person owes money to a council such as the tax council, they may follow the ‘vulnerability policy,’ provided they have one. This is a specific policy that entails the type of people who may be considered as ‘vulnerable’ and the ways to deal with such people.
  • When a creditor has to take control of goods of a vulnerable debtor it is required as per the law that they consider the matter precisely so as to determine whether or not it is right to refer the case of such a debtor to the bailiffs, who are also known as enforcement agents. This National Standards guidance is applicable to the council as well. In addition to that the standards also instruct the creditors and bailiffs to use appropriate discretion to assess every situation on a case to case basis.
  • Lastly, if you owe a debt to the HM Revenue and Customs such as tax credits or income tax then the HMRC may follow their internal guidance. This says that they will need to make feasible and agreeable adjustments if a specific debtor suffers from mental health issues especially those that have a long term and substantial adverse effect on the life and ability of the person limiting their day to day normal activities.

This is certainly not the exhaustive list of the codes that the creditors follow when they deal with vulnerable debtors. You may consider contacting a professional and experienced debt counselor to find the best way to deal with your debts as well as your mental and physical health.

About creditors’ response

You will come across several debt relief options when you visit NationaldebtRelief.comand other similar sites but do not take it for granted that whatever option you choose to follow will be appreciated and responded well by your creditors. For example:

  • If you choose for a debt settlement approach and work with a debt settlement company, the creditor may or may not even show any intent for a negotiation.
  • If they do, they may preferably want to talk to you rather than a debt settlement company.
  • Moreover, they may or may not agree to your request and instead make a new offer for a revised term and repayment.

Therefore, you should not be very rigid and have very high hopes when you meet our creditors for a suitable debt relief option. It is best to work with a professional credit counseling agency to know, to select and to follow the best process.

If you want to know more about creditor response to mental health problem and debt of vulnerable debtors, the following stats will help you a lot. It is found that:

  • Only one-third of the debtors informed that they suffered from mental health issues due to their debts and
  • Their perceptions of the probable response from their creditors were found to be more pessimistic as well.

What does this mean? This means that more people informed their creditors about their mental health issues. The primary reason behind this is supposed to be the improvements noticed in the behavior of the creditors in treating their customers more sympathetically, positively and sensitively, especially those suffering from mental health problems.

However, in spite of this improvement in approach, thanks to the Codes of Practice, experts and critics think that there is enough room for further improvement. They suggest that:

  • Creditors and banks and must raise the mental health awareness among their staffs
  • Improve their process to deal with such customers who have declared their mental health problem and most importantly
  • Must hold regular and further discussion on mental capacities and creditor policies.

They suggest that the creditors should not only consider the mental health issues when there is a problem in repayment but should consider the mental health of their customers at the time of borrowing.

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