Tag: Debt

Financial Stress and Debt Linked to Depression

It has been recently reported that individuals suffering with mental health issues are three-a-half times more likely to have problems managing debt than those without these conditions.

The Money and Mental Health Policy Institute stated that these financial issues are even more prevalent for those people with specific conditions such as bipolar disorder and depression.

It is understood that people with Obsessive Compulsive Disorder (OCD) are in fact six times more likely to be experiencing financial problems.

A survey carried out by the institute involving 7,500 people in England suggests that 1.5 million people were experiencing mental health issues and debt problems at the same time.

There is at least anecdotal evidence which suggests that certain people suffering with depression will often buy items on credit which are not needed in an attempt to make themselves feel better during periods when they feel low. Credit card, store card and catalogue debt are seen as typical examples of unnecessary and unaffordable spending patterns linked to depression.

The Institute’s findings reveal that one in four people suffering from depression have debt problems. This compares to only one in 20 people who do not have mental health issues.

The Institute states that there appears to be a direct correlation between depression, including low moods and impaired concentration levels, to the ability of individuals to properly manage their finances.

The Chief Executive of the Institute has called on the Government to introduce minimum standards for service providers (including banks and utility suppliers) to be made available to individuals with mental health issues to provide these people with greater financial protection.

The Toxic Legacy of Wonga Debt on Individuals

Over 40,000 Wonga customers are waiting to find out whether the pay day loans they received were mis-sold following Wonga going into Administration in August 2018. Many of these customers no longer believe that they will receive any form of compensation with the Treasury Committee stating that their claims had been “cast aside”.

This is four times the previous estimate of claimants and is expected to increase further according to Wonga’s Administrators.

We understand that the Administrators will be setting up a portal to allow customers to make claims on line.

Certain customers are using the services of claims management companies but this may not result in these claims being processed more quickly and may also result in customers incurring claims management charges which will be deducted from any compensation received.

Even if claims against Wonga are successful, it is likely that customers will only receive a small fraction of any compensation owing to them from Wonga’s Administrators.

When a short term credit provider like Wonga ceases to trade, there currently is no scheme in place which protects customers for claims they may have against the provider, including compensation if the loan has been mis-sold.

We expect the position of many of Wonga’s customers to worsen in the future given the aggressive nature of the loans provided, with customers still struggling to manage the repayment of excessive interest payments and default charges where loan repayments have fallen into arrears.

The Chair of the Treasury Committee has stated that these customers have “been left to fend for themselves by Wonga, the Financial Conduct Authority (FCA) and the Financial Ombudsman Service. They have been allowed to fall through the cracks with nobody taking responsibility for their mistreatment. If Wonga continues to damage people’s finances from beyond the grave, it may be time for the Government to intervene”.

Wonga’s financial failure resulted from a significant increase in compensation claims from customers who believed that the loans should not have been provided to them in the first place.

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