Consumer debt and mental health

[I recently applied for a job for which I had to produce a report on consumer debt and mental health. Even though I did not get the job, I did spent sometime to look over the issue so I am posting the report here.]

Consumer debt and mental health
Evidence has shown a clear association between consumer debt and mental health. Given the current financial crisis, extra measures are needed in order to deal with people affected. This note considers the published evidence on the above relationship, examines the current regulations and suggests what policies should be implemented in order to ensure that sensitive approaches are adopted for the benefit of the consumers, the health and social carers, and creditors.
·      There are clear links between consumer debt affecting mental health, and vice versa, even if the direction of causality has not been yet verified.
  • Given the current financial crisis, more people will fall in debt, leading to increased demand for mental health services.
  • Currently mental health and debt are treated as separate issues. Any links that exist between financial services and health and social sectors are underdeveloped, partly due to legal and regulatory barriers.
  • People need to be treated as “patients” and “bank customers” at the same time, so a co-ordinated cross-sector national approach is needed in order to mitigate the problems.


  • Consumer debt: debt incurred by an individual for personal, family or household purposes.
  • Unsecured debt: if there is no collateral that is security for the debt. Most consumer debts are unsecured.
  • Problematic consumer debt: when the individual is two or more consecutive payment behind
  • Mental Health problem: anxiety and stress, depression, self-harm and suicidal thoughts, strain on personal relationships and self-esteem or social exclusion


In 2008, UK households owed over £230 billion in unsecured consumer credit (see definitions box)[1], whereas the proportion of households reporting consumer unsecured debt as a financial burden in 2008 was the highest since 1995[2]. Given that being in debt can have a negative effect on one’s mental health and that those living with a mental health problem are more likely to fall into debt, a large percentage of the national consumer debt mentioned above is owed by people suffering from mental problems.
This percentage is likely to increase even further. Evidence suggests that large economic crises, such as the one we have been experiencing since 2008, have a detrimental effect on the mental health of a population. This is especially true for the vulnerable subgroups (e.g. those with pre-existing mental disorders, the unemployed and those of low socio-economic status)[3]. Many of these subgroups include people with little previous experience of coping with hardship and will thus be at greater risk of mental health problems, as compared to those ‘inured’ to financial insecurity5.
Scale of the problem
While there is a number of studies that have looked using different methodologies at the relationship between debt and mental health their majority has either treated all types of debt (mortgage, utilities, consumer, etc) as one, or did not specify what is meant by ‘debt’. For this reason, our evidence comes from 13 studies that have specifically investigated the relationship between consumer debt and mental health, or included consumer debt alongside other debt types[4].
These studies showed that consumer debt has negative effects on people’s mental health: those with consumer debt exhibited lower average levels of psychological well-being, higher levels of stress and depression. It was also found that those with mental health problems are more likely to be in debt. For example, a large UK survey by Mind showed that out of 924 individuals with mental health problems, half had arrears on credit/store cards, one in three on loan repayments and one-in-five on goods bought on hire purchase or mail-order[5].
The link between debt and mental health has been recently recognised by a number of governmental departments. The New Horizons report on Mental Health mentioned that intervention to tackle social inequalities such as debt may be of benefit to individual mental health and recommended further research to be carried out around the issue[6]. However, no guidelines or recommendations were mentioned in the report. In addition, the department of Business Innovation and Skills has included specific reference to the issue of mental health in its Consumer White paper[7] and the Office of Fair Trading has made repeated reference to the difficulties facing people with mental health problems. This recognition has been however for debt in general and not specifically for consumer debt.
A number of non-governmental initiatives have been undertaken in order to increase awareness of the relationship between debt and mental health of health and social care services, money advisors, financial services, government sectors, as well as people suffering from mental health problems. Similarly to the governmental reports above, all these initiatives did not concentrate on consumer debt, but some of them referred to it.
In 2006, the Royal College of Psychiatrists developed ‘Final Demand’ Booklet for health and social care professionals in order to help them respond quickly to the needs of patients who are suffering from mental health and financial problems[8]. They also created a standardised clinical information form, called ‘Debt and Mental Health Evidence Form’ (DMHEF) to be used by health and social care professionals in order to provide their patients with clear information on how to proceed. In 2007, the Money Advice Liaison Group (MALG) provided voluntary guidelines for money advisers and creditors to support the use of DMHEF[9]. More recently, MALG published “Good Practice Awareness Guidelines For Consumers with Mental Health Problems and Debt”[10]. Furthermore, a national campaign was carried out by Mind in 2008 which targeted the financial services as well as various government sectors.
Despite these efforts, links between financial institutions, money advisers and health and social care services are still severely underdeveloped. This means that the “health” and “debt” components of this issue are mostly addressed separately, making most strategies ineffective[11]. The strategy agreed by all parties is to foster and maintain a coordinated national programme in which all of financial, advice, health and social services would help individuals receive well organised and complementary support, regardless of entry point.
For such a programme to succeed the appropriate legal and organisational infrastructure needs to developed at all entry points, whether these are health and social care services, money advice or financial services. For example, creditors should be legally obliged to train their staff to encourage customer disclosure, especially since people with mental health problems tend to be reluctant to report it. Money advisers should be legally obliged to routinely provide referral services to clients that disclose a mental health problem for which they require support. Finally, all health and social care professionals should receive a basic ‘debt first aid training’, in order to know how to talk with patients about debt and how to refer to and support debt advisers.
In the mean time, new research needs to be commissioned and undertaken on the effects of consumer debt in particular. Not all consumer debt is problematic, research is needed to further understand when it becomes especially problematic, as well as the direction of causality between consumer debt and mental health. In these new studies there needs to be a consistency in the conceptualisation and measurement of debt (e.g. to differentiate consumer debt from other types of debt). Furthermore, a survey of the current practices of all types of financial services concerning costumers suffering from mental health problems, should be carried out.


[1] Bank of England (2008) “Lending to Individuals: December 2008” Bank of England statistical Release, London.
[2] Hellenbrandt. T and Young, G (2008) “The financial position of British households: evidence from the NMG research survey” Quarterly Bulletin (Bank of England) Q4: 384-392
[3] Zivin, K, Paczkowski, M and Galea, S (2010) Economic downturns and population mental health: research findings, gaps, challenges and priorities, Psychological Medicine 14:1-6
[4]Royal College of Psychiatrists (2009) “Debt and Mental health: What do we know? What should we do?” London
[5] Mind (2008) “In the red: debt and mental health”
[6]HM Government (2009) “New Horizons: A shared vision for mental health”
[7] Department of Business Innovation and Skills(2009)  “A better deal for consumers: delivering real help now and change for the future [Consumer white paper]”
[8] Royal Society of Psychiatrists (2006) “Final demand” Booklet
[9] Money Advice Liaison Group (MALG) (2007) “Guidelines for money advisers and creditors to support the use of DMHEF”
[10] MALG (2009)  “Good Practice Awareness Guidelines For Consumers with Mental Health Problems and Debt”
[11] Jenkins R, Fitch C, Hurlston M, Walker F (2009) “Recession, debt and mental health”  Family Medicine Mental Health  6:85-90

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