On May 4, the UK government launched a new “Breathing Space” scheme in England and Wales. This debt respite scheme gives people struggling
with debt problems a 60-day period of legal protection during which all interests and charges on their debt will be frozen while they receive professional debt advice. No enforcement action will be taken during that time. People receiving treatment for mental
health problems can get a longer grace period. Debt charities like StepChange have campaigned for years for the introduction of that breathing space as they see the
harm debt can cause every day.
Money And Mental Health Affect Each Other
“Mental Health Matters.” People with problem debt are significantly more likely to experience mental health issues. Research in
the UK shows that one in four adults will have a mental health problem at some point in their life. One in two adults with debts has a mental health problem. One in four people with a mental health problem is also in debt.
Mental health and money problems are often intricately linked. If people experience mental ill-health, it can affect their ability to work and have an impact on their personal finances. Emotional spending can give people a brief high, so they might overspend
to feel better. Going through a manic or hypomanic phase may sometimes lead to impulsive financial decisions. Yet some people might not be able to afford essential things they need to feel well — like food, housing, heating, or treatments like medication and
therapy. Financial worries can easily trigger feelings of anxiety, panic, or depression. It can quickly start to feel like a vicious cycle.
We are seeing an increase in mental health problems amid the pandemic: Isolation, fear of infection, joblessness, childcare, and other challenges have severely impacted the mental well-being
of many people around the world. Financial vulnerability is also rising sharply.
Financial Services Businesses Need To Identify And Protect Vulnerable Customers
Financial well-being has gone up the agenda for many financial services firms amid the COVID-19 crisis. As part of their financial well-being strategy, firms need to focus on
financial protection and exercise particular care with vulnerable customers — which include customers experiencing mental health issues. That means anticipating the needs of vulnerable customers by identifying vulnerability sooner, protecting them from
harm, and making sure they consistently receive fair treatment. This is an opportunity for financial services firms to build trust and demonstrate purpose. To better protect vulnerable customers, financial services firms should:
- Research vulnerable customers’ needs. To better identify vulnerable customers and understand the challenges they face, firms need to conduct in-depth design research. You need to understand who is vulnerable and what they’re vulnerable
to. Prioritise concrete evidence over assumptions. Apply qualitative and quantitative methods to understand the drivers and indicators of vulnerability and the impact being vulnerable can have on a person’s ability to engage with financial services. Surveys
or focus groups can help you understand the risks of harm for vulnerable consumers, what prevents them from managing their finances effectively, and why they might find it difficult to self-disclose. Nationwide
Building Society has partnered with relevant experts and charities — including the Money Advice Service and the Money and Mental Health Policy Institute —
to develop a vulnerability knowledge base.
- Develop capabilities that help them identify vulnerability sooner. Firms can identify vulnerability more effectively by: 1) training staff to pick up on and report signs of vulnerability, 2) helping customers self-disclose, and 3) investing
in tools, technologies, and systems of insight to identify vulnerability through data analytics. Debt advice service Tully lets users disclose their circumstances, such as mental health issues or disability.
- Develop tools to help vulnerable customers. Develop products specifically designed to meet the needs of vulnerable customers, such as alerts, spending trackers, gambling block features, and debt management tools. Monzo created
a gambling block feature to help customers overcome their gambling addiction.
- Provide adequate support. Firms should make customers aware of any specialist support services that are available from their financial services providers and, where relevant, third parties and then ensure that these services are accessible
and easy to use. Lloyds Bank makes it easy for customers to find support and guidance on its website.
- Provide employees with the right knowledge, skills, tools, and confidence to take action. Make sure that all employees — especially those who operate at the front line — are equipped to make the right decisions in their day-to-day jobs
and protect customers effectively. Communicate the findings from your vulnerability research to all employees and provide empathy training, like Navy Federal Credit Union.