Consumers more ashamed of debt than mental health issues

23rd October 2018
Britsh consumers are more ashamed of money worries than mental health issues as with 8 million suffering the secret financial difficulties alone according to new research. It has also found that families owe a record £213.5 billion on credit, with that 1 in 6 of carrying the mental burden of money problems alone.

The research by Debt Hacker highlights the impact of problem debt can be profound on mental and physical well-being, The reports says that high-cost short-term lenders (payday) are pushing loans that borrowers just can’t afford. Debt Hackers says this makes it all the more important we bring this subject into the open. Previous research shows that those struggling to repay debt or who hold a high-cost payday loan feel much more negative about their mental health and about life in general. With 1 in 4 people (24%) have had to skip meals due to a lack of funds.

The report says these figures become even more pronounced when you consider payday borrowers:

  • Payday borrowers are more than twice as likely to have to forgo a meal as the average (56% v 24% )
  • Over a third of payday borrowers (37%) have been unable to get to work due to a lack of funds – almost four times the average (10%)
  • Over a third of payday borrowers (36%) have been unable to get to a job interview due to a lack of funds – more than four times the average (8%)
  • Over a third (35%) have missed a health appointment due to a lack of funds
  • A quarter of those who’ve taken a payday loan (25%) have needed to use a food bank – nearly four times the national average (7%)
  • Two thirds (69%) of those who have taken out a payday loan are afraid to answer the phone / the door / open mail in fear of bailiffs
  • Two fifths (41%) of people who’ve taken out payday loans think debt is something to be ashamed of, considerably higher than the average (26%)

With over half (54%) of payday borrowers taking out a loan to service existing debt, the report says it’s critical that we start to shine a light on this problem and take steps to solve it. The research was undertaken with ICM Unlimited by Debt Hacker, a new online campaign that aims to put power back in the hands of borrowers and helping them fight back against high-cost lending.

Debt Hackers says that if a borrower needs to take out further credit to pay off a payday loan, then that loan was sold unaffordably, and can kick off a spiral of debt. If lenders chose not to act irresponsibly, but instead carried out proper affordability checks, problem debt could be largely avoided. The FCA’s own research shows that in around 6 out of 10 cases people find other ways to manage when refused credit, and over two thirds actually find that refusal beneficial, as it forces them to take stock and address money problems. Borrowers need to understand their rights and their options. 1 in 10 people have taken out a payday loan. These often have astronomical interest rates – up to 1500%. Lenders have a duty of care to carry out affordability checks before issuing a loan, but where borrowers have to take on further debt to pay off their existing loans, that simply isn’t happening, creating an inescapable spiral of debt. This trap captures huge swathes of society, with NHS workers, teachers, and gig economy workers being the most prolific users of unaffordable payday credit.

In a situation where a loan has worsened a borrowers situation, customers have the right to make a complaint, and to be refunded any interest, charges and potentially further compensation against the unaffordable loan. And critically, that loan will be struck from their credit file. Yet few consumers realise they have this right, and that they have the power to take action themselves, without recourse to high cost claims companies.

Debt Hacker offers free digital support and tools to help borrowers bring an avalanche of complaints.