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Tangled up in the blues - and deep in the red

February 20, 2007 7:55 AM
By Neasa MacErlean in http://money.guardian.co.uk/creditanddebt/debt/story/0,,2016410,00.html

Mentally ill people can be self-destructive spenders keen to take easy credit.

One in seven people struggling with debts this year will be fighting on two fronts: mental health issues will make it far harder for them to concentrate on their money problems.

At any one time, about 7 million adults in the UK are suffering from depression or other conditions of the mind. The good news, however, is that parts of the financial services sector are starting to deal with the issues such disorders represent much more effectively.

One in seven gas and electricity account-holders are already on a register of elderly, disabled or otherwise vulnerable people, and there is an industry-wide agreement not to disconnect them for non-payment in winter. Other facilities are also offered - such as the possibility of having a vulnerable person's bill sent to a nominated third party to take care of. You can ask to be put on these registers by ringing your supplier or by going through the consumer watchdog Energy watch (08459 060708).

The financial services industry does not have a history of treating people with mental health problems well. Many insurance policies - such as payment protection insurance - will not pay out if the root cause of a claim is this kind of condition. And the Banking Code (which covers the British Bankers' Association, the Building Societies Association and the Council of Mortgage Lenders) makes no mention of the needs of people with mental health difficulties.

Lenders are now coming under more pressure from regulators not to make credit easily available to people who do not understand the implications of it. The Financial Ombudsman Service - which handles unresolved complaints against the industry - describes the issue as a 'very sensitive and difficult area' and says: 'It will not always be apparent that someone may have a mental illness. However, where a firm has been "put on notice" by a friend or relative, we would expect them to take this into consideration before lending more money.'

In its guidance to firms, the ombudsman says: 'Customers will not be bound by a contract if they did not freely agree to enter into it and the firm was on notice of this. Examples include situations where the customer lacks the mental capacity to understand the nature of the contract and the firm knows that.'

But the whole area is a difficult one and the ombudsman concludes: 'Mental illness can take many forms and certainly does not, of itself, mean that a person should not be given credit.'

By contrast, the Finance and Leasing Association's Lending Code undertakes: 'We will take particular care if you are suffering from health problems, including mental health difficulties, when we are made aware of this.' This general statement is made more concrete through requirements for staff to be trained to deal with such clients and to be 'sensitive to your condition'.

The Banking Code is currently being reviewed - and the ombudsman, for one, has suggested that it specifically mention this area in future.

Many depressed people lack the willpower, resilience and attention span needed to understand financial propositions or fight off aggressive salespeople. In a current case in Staffordshire, Citizens Advice staff are trying to persuade a bank to review £12,000 of debt a female customer took on when it offered her loans. The woman says she has prayed to God and that the bank has sorted out her debts - but Citizens Advice believes she does not understand that the bank will want its money back; in their view, she 'clearly has mental health issues'.

In a similar case decided by the ombudsman, the father of a young customer with serious mental health problems successfully argued that money should not have been lent to the young man and that he did not have to repay it. Initially, when the father complained to the bank, it said it had acted properly since it had carried out a credit score check on him, and also argued that it could not have known his mental history as he was a new customer. It turned out, however, that the man's behaviour had been so strange on the day he met bank staff that various local retailers had 'declined to do business with him at all because he clearly appeared unwell'. The bank gave him some of his new loan in cash, and this was quickly stolen from him when he left its premises.

Circumstances can conspire to make people more depressed at this time of year - as post-Christmas debts mount, prices rise and the number of divorce petitions increases. Some people may start exhibiting signs of depression without realising it. Here are some symptoms to bear in mind if you are wondering whether you or someone you know are becoming depressed:

· You experience feelings of being overwhelmed. 'People who are depressed get very negative views of themselves,' says psychology lecturer Dr Brian Brown of De Montfort University. 'The burdens appear to outweigh the opportunities.'

· You feel as though you are in a tight corner already. There are theories that the poor and those already struggling with other problems (such as relationship breakdowns) will be much more prone to depression than flamboyant aristocrats, for instance, who simply feel they are down on their luck.

· You spend more as a way of cheering yourself up. 'Binge-spending', especially on the internet, is an alternative prop to binge-drinking for the depressed.

· You are not opening your bills. This is a very common symptom of depression, and you should recognise how quickly problems can mount up if you do nothing about them. The best thing for most people with growing mental health problems to do is to seek help, which is readily available.

Where to get help

Citizens advice guide: adviceguide.org.uk, or Yellow Pages

Disability Rights Commission (advice and complaints for disabled; also has mental health action group): 08457 622 633 Energy watch drc-gb.org.

Energywatch: 08459 060708 or energywatch.org.uk.

Financial Ombudsman: 08450 801800 or financial-ombudsman.org.uk.