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A Healthy Balance - Debt Recovery and Mental Health

on Friday, 03 June 2016.

Recent reports record a worrying increase in mental health issues among the UK student population

Recent reports record a worrying increase in mental health issues among the UK student population, much attributed to student concerns about finances and the rising level of debt - not only from tuition fees, but also from overdrafts, loans and credit cards.

For example, a survey carried out by the National Union of Students (NUS) in 2015 reported that 78% of students had experienced mental health issues in the last year and a third of respondents that they had suffered suicidal thoughts. There is often a recorded and direct correlation between mental health issues and debt, with one in two adults with problem debt also suffering from a mental health problem.

Rising debt and the international profile of such debt is also a serious concern for the institutions that are owed money. This is a significant issue: reports in 2013 noted that £6.46 million was owed to five universities across the West Midlands and in Staffordshire alone. Some of these debts were over a decade old and were spread across 67 different countries.

Debt recovery is complex, time consuming and can be costly in terms of finance team resource and/or the instruction of debt consultants or lawyers.  Enforcement abroad more so. Court fees are on the increase. Students are ever more aware of legal protection offered to them as consumers, of their right to complain and their right to dispute legal claims. The situation is more complicated if the potential defendant to a claim for unpaid fees is suffering from a mental health condition.

This poses an obvious dilemma for colleges and universities. Given the duty of care that higher education institutions have to the students that attend them, should the revelations about the increasing prevalence of mental health issues amongst the student population impact upon their process for recovering student debt?

Creditors are generally not mental health professionals and cannot be expected to diagnose or support those debtors who reveal that they may be suffering from a mental health condition. However, they can be sympathetic to the possibility of this when seeking to recover debt and can and should provide information to enable students to access appropriate support.

Guidance on dealing with litigants in person requires solicitors (if instructed to pursue debt) not to mislead the Court or otherwise to take unfair advantage of any third party and acknowledge that debtors who are vulnerable may require additional support from the court or the lawyer. In providing information to a vulnerable litigant in person with a disability, the requirements of the Equality Act apply as they would for a client and we suggest that finance teams apply the same criteria.

Research by The Royal College of Psychiatrists and the Money Advice Trust has suggested that awareness of mental health issues could result in better rates of recovery and revisions to the Lending Code to include reference on how lending institutions like banks and building societies treat those with mental health conditions is evidence of the growing trend of awareness.

Entering into a dialogue with debtors and developing a better understanding of any health issues which may affect their dealing with their financial situation is likely to assist with any repayment discussions and ultimately impact upon whether a debt is successfully repaid or not.

We detail below some practical suggestions for the management of student debt, targeted at facilitating debt recovery from those students you know or suspect to be suffering from a mental health condition:


  • We recommend early discussions with debtors. These will help to identify whether there are any internal or external factors which may impact on a student's ability to pay the debt. It may be helpful to ask whether a student has any health issues which may affect this.
  • Signpost third party agencies who may be able to support students with mental health or debt issues - these may include your students' union, advice centres and helplines.
  • Adopt a flexible approach to debt recovery. We do not advocate a lack of rigour, but the offer of flexibility of payment terms or recovery action, especially for students with health issues, which is likely to result in greater return.
  • Many debtors who are suffering from health conditions bury their head in the sand when it comes to dealing with financial issues.  If a student admits to health issues, you could offer to liaise with third parties, such as a friend, family member or support worker.  In such situations, getting cooperation from the debtor at an early stage and opening up channels of communication is likely to make the process of debt recovery more straightforward. However, avoid entering into a dialogue with multiple parties about the same debt unless it is appropriate in the particular circumstances and always obtain a debtor's consent before speaking to a third party.
  • Be alive to data protection issues and, specifically where a mental health condition is disclosed, ensure that the legal requirements for the management of sensitive personal data are followed. This is likely to require you to inform the debtor on how their information will be used and recorded and you should seek their consent to share it. It may be helpful to review how information is shared between the admissions and finance teams. Training on the application of the Data Protection Act 1998 to these circumstances is recommended.
  • Provide training to your collection staff on how to deal with student mental health issues insofar as they may affect debt recovery. This is important for opening channels of communication (a co-operative debtor is more likely to share information about what they can afford to repay). The institution is likely to save money by collecting its debt in a compliant manner without creating additional risk and facilitating an early and informed decision about the likelihood of recovery.
  • If retaining the services of a debt collection agency or solicitors, check that they can and will offer a similar approach and that they readily appreciate the difference between a mental health issue and a lack of mental capacity. The latter is not dealt with in this article but will have an impact on the process for recovering of debts, particularly if litigation is contemplated.
  • Be sensitive – while recovering debt is a necessary task for most institutions, the process will be simplified and less stressful for both sides if there is better awareness of the factors, including mental health, that may lead to the accrual of debt and a failure to manage its payment effectively.

For more information, please contact Tabitha Cave on 0117 314 5381.

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