New guidelines highlight the
potentially sensitive issues if a customer’s mental capacity is
affected, says Lindsey Summers
Following the release of the
Debt Collection Guidance by the Office of Fair Trading (OFT) in
November 2011 – which includes updated advice on the subject of
mental capacity – there has been a spotlight on the subject of debt
recovery from customers with mental health problems.
Go deeper with GlobalData
Naturally, the subject can be extremely
sensitive and the importance of creditors being fully prepared to
handle such cases effectively is reiterated in the OFT’s
irresponsible lending guidance. These documents discuss a
creditor’s approach when considering applications from customers
who have, or are suspected of having, some form of mental capacity
limitation which may affect their ability to make an informed
borrowing decision.
If a customer is diagnosed with a mental health
problem after entering into the agreement, it is important that the
creditor is equipped to provide any necessary support during the
time of difficulty and possible hardship, and has specific policies
and systems in place to ensure the appropriate treatment of the
debtor.
This may be through the training of specific
members of staff to handle these accounts, for example. In return,
this will also help with the management and efficiency of these
accounts.
For those creditors with an asset outstanding –
for example, under a hire purchase agreement – creditors may want
to recover the asset, particularly where no payment plan is
forthcoming. However, it is important to proceed with caution.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataWhere a creditor has a debt outstanding and the
customer has alerted the creditor that he or she is suffering from
mental health problems, it may be appropriate to place the matter
on hold for a minimum of 28 days to allow the customer (or a third
party on his or her behalf) time to provide evidence of his or her
mental health and proposals for a payment arrangement.
It is inevitable that the creditor will suffer
depreciation in the value of the asset over time. So, if the
customer cannot afford to pay, however much forbearance is granted,
it may be that it is eventually inevitable that the asset is
returned to the creditor. This delay may not be in the customer’s
interest, as there is an increased risk in a larger shortfall
liability. It is important to assess the risk early on to minimise
any potential loss for the creditor as far as possible, while at
the same time balancing the need to treat customers fairly and be
transparent in dealing at all times.
For some mental illnesses, medication may be
prescribed for which extra precautions must be taken to ensure the
safety of the asset. As the creditor, you will need to ensure that
the customer has informed his or her insurers of the condition, as
if there is an accident, it is possible that the insurance company
may not pay out for repairs (or may write it off).
Lindsey Summers is a recovery expert with
DWF’s banking & finance team
