Lenders will be forced to tone down the language used in letters chasing unpaid bills and loans under new laws, following concerns they lead to mental health problems and even suicide.
HM Treasury is planning to update decades-old rules that force institutions such as banks to write confusing and threatening debt collection letters to people who have fallen behind on their repayments.
These “default notices” are designed to give people who are struggling to pay their debts fair warning before lenders take further action, but much of the formatting and content has not been updated in nearly 40 years.
It marks a major victory for the Money and Mental Health Policy Institute, a charity set up by money-saving guru Martin Lewis, which called for the wording in debt collection letters to be changed.
It found 100,000 people in problem debt attempt to take their own lives each year in England, and that letters chasing unpaid sums were a key factor in people becoming suicidal.
The new rules will make debt letters less intimidating and restrict the amount of information lenders have to make prominent. They will also force firms to use bold or underlined text in place of block capital letters, which many see as alarming.
Confusing legal jargon that can cause extra stress will be replaced with more widely understood words. Letters will also direct people to free debt advice providers. Currently letters recommend that people in problem debt consult a solicitor or local trading standards board, which is viewed as outdated.
Martin Lewis said: “It’s no exaggeration to say that this change could save lives.
“The last thing people struggling with debt need is a bunch of thuggish letters dropping through the letterbox, in language they can’t understand, written in ‘shouty’ capitals alongside threats of court action.”
The proposed changes will apply to overdrafts, credit and store cards, payday loans, and personal loans. The Government hopes to get them through Parliament by December.
But the changes will not apply to Britain’s biggest debt collector HM Revenue & Customs, which has come under repeated fire for failing to safeguard vulnerable taxpayers. A Telegraph Money investigation previously exposed how the tax authority continued to target vulnerable tax debtors despite being issued with warnings from medical professionals.
But HMRC may also be forced to change its approach too. MPs are voting on a 60-day “breathing space scheme” which will temporarily freeze debt collection against people with problem debt and will apply to other debts such as tax and utility bills. Former prime minister Theresa May promised the scheme in the 2017 Conservative party manifesto.
The banking trade body UK Finance said lenders would do everything they could to support customers.