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Introduction and Recap of Key Themes

As this is the final paper in this project, it is important to first recap the key themes outlined throughout.

Paper 1 took initial steps to outline the true and often ignored, cyclical relationship between debt and mental health. The 2008-9 financial crisis opened the eyes of experts to the relationship between financial difficulty and mental health problems. Typically, factors such as income; employment status or demographical differences such as race or locality were considered the main variables. However, new and growing evidence suggests that debt, above all of these factors, is the most prevalent mediator between financial difficulty and mental health problems.

Building on this foundation, Paper 2 focused on specific disorders and behavioural responses among indebted adults with mental health problems. This split into internal responses (depressive symptomology, anxiety, self-esteem issues and even suicidal thoughts) and external responses (behavioural patterns – like irritableness, deep anger, self-destructive habits and impulsive actions.)

Paper 3 honed in on the true human cost associated with the psychological effects of debt. Sticking more closely to the external responses outline in Paper 2, we presented new evidence detailing the firm associations between household unsecured debt and likelihood of separation or divorce. An emphasis was placed on the near total absence of clear communication between the relevant couples – this referring us to the stigma that is still placed on financial trouble and debt in our society.

Paper 4 took this human cost theme further, presenting evidence which suggests the ultimate human cost of debt is not parental separation – but a detrimental impact on a child’s mental wellbeing, and in turn their future prospects.

This final paper will have two main focuses. First, the unique and specific danger of credit culture and consumerism. Evidence suggests specific debt types like credit cards or balances owed to payday lenders are particularly dangerous in terms of mental health – this has been referred too throughout the project, but not examined in as much detail as desired as it hasn’t properly fit into the specific structure of each paper so far. As it is possibly the most recurring theme throughout this authors research, it is only right to pay it due attention in this closing paper. Secondly, the project has focused, so far, on outlining the dangers, consequences of and associations between unsecured debt and mental health, as well as the human costs of these associations. Raising awareness of the true picture is of critical importance, but this project would remain a job half done if it did not look to outline a range of recommendations in order to try and tackle the issue we face. Recommendations will be split into categories of; preventative measures to implement that may help stop issues ever arising; training, organisational best practice and educational reform and initiatives to tackle the stigma on debt with reference to successful, related examples.

The Unique Danger of Credit and Consumer Culture

The international comparison with Latin America referred to in Paper 1 illustrates perfectly the unique danger credit poses. Chile in South America has seen remarkable socio-economic progress in recent decades, lifting millions of people out of chronic poverty with one of the fastest growing middle classes in the world. However, in 2010, Chile was one of the depression capitals of the world – with 17% of its adult population being clinically diagnosed. Finance and socio-economic development, one might think, couldn’t possibly be an explanation for a depression epidemic in this case, where so many have been pulled above the baseline of poverty. This would be incorrect. Chile’s debt to income ratio increased by 35% between 2003 and 2009, and in 2010 there were over 19 million active credit cards in the country – more than one per-person. With economic growth comes greater access to credit, and the psychological costs of this.

It would be naïve to think this association is restricted to developing parts of the world. In the United States between 1989 and 2006, total consumer credit card debt rose from $211 billion to $876 billion. Further, UK mean levels of individual and household outstanding credit have increased by over 50%, between 1995 and 2000. This has mortified to the point we are at now – total unsecured debt outstanding in the UK is £200.882 Billion, equating to over £12’000 per family.

Debt, it must be reiterated, can be a useful tool in human investment – very few can acquire higher education or buy a home without incurring some debts. These are secured, self-investment debts – and as shown in Paper 4, these are often associated with better psychological wellbeing. However, unsecured, borrowing debts, particularly credit cards and payday loans display worrying evidence of negative psychological cost. Several studies have supported this. Firstly, John Gathergood in 2014 conducted an equation analysis – a test where a selection of variables are added one at a time to an analysis on the effects of financial hardship. The results are recorded as each variable is added. Variables 1 and 2 were age and socio-economic status. 3rd was family status, and unsurprisingly it was found that being married reduced the likelihood of mental health problems related to finance, as there was the option to share resources. However, the 4th variable was credit card debt measures, and once added, results showed that a higher credit card debt to income ratio is associated with greater anxiety – to the point of ruling out the positive association between family status and sound mental health. There was no effect when variable 4 was changed to secured debt like mortgages. Furthermore, in terms of common mental disorders, Jenkins in 2008 found that those who borrowed from moneylenders had the highest rate of CMD’s like anxiety and depression, with a likelihood of 58%. Building on this finding, in 2015 Zurlo in a study of American households found that credit card debts had a specific and distinguished relationship with depressive symptomology.

Zurlo’s conclusion was that: “There may be a major psychological cost associated with the consumer culture in the United States.” A conclusion, figures suggest, that is becoming more and more self-evident with each passing decade. It is the opinion of this project that borrowing debts like credit cards, unsecured loans and payday loans are the primary drivers in the relationship between financial difficulty and psychological wellbeing – transcending even income.

Recommendations

As this is a live field of research, most of the literature aims to raise awareness of the problem, and move towards influencing social and government policy in the long run. This ultimate objective is the correct one – however it was to this authors surprise throughout the research that in almost all papers detailing possible solutions or initiatives, insolvency practitioners and financial advisors were not paid due attention in terms of their role in tackling the problem. This is a serious limitation to the field at the moment. IP’s and financial advisors of any significant stature serve as a first point of contact with more vulnerable people each day than any other relevant parties, and have a major role to play in tackling the issue at hand.

Regardless, academic recommendations aimed at government officials, medical health professionals and creditors do contain some common threads to pick up on. Many of the initiatives suggested would benefit from the involvement of financial advisors actually dealing with those vulnerable to the effects of unsecured debt on a personal, daily basis.

Preventative Measures

On the surface, it would appear that prevention of problem debt in the first place would be counterproductive for advisors offering paid for solutions. However, the ambitious advisory firm should notice the opportunity to get ahead of its competition, and reap the benefits over time by investing in products, settings, and systems to help people stay out of financial difficulties in the first place. With such high numbers reporting changes in their spending and financial management during periods of poor mental health, it is clear many people with mental health problems need help to prevent financial harm when they are unwell. 84% of families in problem debt said they would have liked access to more or earlier support with their debts. The lived experience of most advisors, who’s clients often contact them from desperation, would echo this. Going forward, financial advisors could – by using technology and innovation; providing better budgeting tools; settings that enable self-regulation and self-control – play a vital role in offering assistance earlier, which evidence suggests would go a long way toward tackling the issue we face.

Another particular trend to try and tackle, using the same tools and methods as above, might be the recent rise in ‘crisis spending’ – periods in which someone may spend recklessly due to a spike in mental health problems. Whether acting impulsively or seeking comfort, in an MMHPI survey, over 40% said they increased spending late at night in particular while unwell.

Finally, advisors could look to delve deeper into the issue of mental capacity at the point of sale. In the UK, most lenders are not required to assess mental capacity. This seems to almost directly contradict the Mental Capacity Act 2005 – which is said to be “designed to protect and restore power to those vulnerable people who lack capacity;” and cover over 2 million people in England and Wales. In 2017, the MMHPI found 93% said they spent more than usual and 74% said they put off paying bills or dealing with creditors during periods of poor mental health. A further 59% took out a loan they ‘otherwise wouldn’t have.’ Taking this into account – it appears there is a basic lack of statutory protection for those of poor mental health to the dangers of reckless borrowing or spending. The probability that large numbers of people are taking out credit – in particular online – during periods where they do not have mental capacity is likely a major factor underlying the problems outlined in this project. As such, financial advisors’ due to their extensive experience with clients as a first point of contact could look to work with legal experts and mental health professionals to scope out how cognitive/mental capacity tests could be mandatorily added into the process of an application to borrow.

Training, Best Practice and Education

One initiative financial advisors, creditors and mental health professionals could all take immediately is to include mental health in organisational policy, and train staff on how to deliver these policies. Guidance on how to deal with the specific needs of indebted clients or patients with mental health problems must be provided to staff – even if re-training is required. The best option ideally, for a large organisation would be to employ a specialist team, ready-trained to the appropriate standard. However, evidence suggests that for existing staff, re-training or simply clearer guidance would help them meet the required standard as well. In 2015, Chris Fitch found in a survey that 69% of staff indicated that they worked in an organisation where a clear mental health policy did not exist, and they would like one to be in place. When a customer disclosure is made, 44% of staff reported they found it difficult to know what to say, one respondent said: “There is no clear process or procedure to follow when we encounter this sort of person. We are left to our own devices in this sense, so the approach can be very inconsistent.” Specifically, staff wanted clearer guidance on how customers’ financial situations can be affected by mental health problems, and vice versa; and also, the different types of specific mental health problems in question. It should be noted that this study was conducted with staff of numerous banks and other creditors, however it should be taken into consideration all the same.

An example of adapted organisational practise can be found in the MMHPI’s collaboration with the National Debtline, formalised last year. Following MMHPI guidelines, the National Debtline have a team in place who endeavour to arrange a formal ‘Breathing Space’ period for their clients – a 30-day period of non-contact in the event of significant changes in circumstance and/or a period of mental health problems. Clients are also given assistance in filing a Debt and Mental Health Evidence Form. In some cases, an explicit, formal declaration of such circumstances can legally impact how certain creditors can pursue collection. For example, creditors may be forced to use specialist staff, only contact the debtor at certain times and through certain means if at all or even prolong the ‘breathing space’ period beyond 30 days.

The role of the education system in combatting the problem cannot be ignored. In the opinion of the Griffiths Commission, education on finance is simply not up to the appropriate standard. Education, they say, must be tailored to focus on the realities of money management – engage our young people with real world, practical issues they will face in reality so as to try and prevent their gravitation towards the easy option of democratized credit in the future. Consider again that as shown in Paper 4, only 1 in 5 10-17-year olds thought that their school had taught them about money management and debt, and yet more than half of the same group of children said that they saw advertising of loans often or all the time. Young people are learning about borrowing and credit from sales-driven advertisements, not their schools. The Commission recommends that schools must begin to prepare children and young adults for events such as job loss, starting a family, the breakdown of relationships and loss of earnings through illness – along with fundamental, basic budgeting. These, over time, must be integrated into the national post-14 curriculum if our society is to have any chance of reversing the disproportionate rate at which credit is impacting our young adults. Financial advisors, again given their extensive experience may wish to become active in pursuing this along with educational authorities.

Combatting the Stigma

The biggest obstacle to addressing the issue is of course the social stigma placed on discussing finance and debt. There is no government policy, employee training methods or best practice guideline that can change how an issue is perceived in the mind of every individual. Changing social attitudes takes time over all else.

The major problem, however, is that unsecured consumer debt continues to rise at record levels with every passing decade. This would suggest more and more people will become vulnerable and the problem may only get worse. Strangely, unsecured debt per-head rising further to the point it becomes a social-norm may in fact be the only way to effectively remove the stigma – perhaps the situation needs to get worse before it can get better. Results from local studies conducted by John Gathergood indicate that the psychological impact of problem debt, both secure and unsecure, is less severe for individuals who live in localities in which problem debt is more widespread. This result is in keeping with the finding from the unemployment literature that the effect of unemployment on psychological health is less severe in localities in which unemployment is more prevalent. The social-norm effect serves to reduce the anxiety and worry caused by an individual’s problem debt position. So, should unsecured debts and credit become a nationwide social-norm – perhaps the psychological effects would cease.

Of course, this would be an economically disastrous solution. Although more difficult, our society will have to combat the taboo of discussing finances head on sooner rather than later based on the current rate of increasing debt. For guidance on the specifics of tackling the stigma, inspiration can be found in similar cases where previously stigmatised topics have over time become less so.

The first, most recent and perhaps best example is recent work to combat male prostate cancer – which around 1 in 8 British men will suffer from prostate cancer at some point in their lives. Rocco Rossi, President and CEO of Prostate Cancer Canada summarises the social stigma, and men’s reservations about seeing a doctor rather well: “We don’t want to talk about health and, when it’s health below the waist, if we aren’t bragging about it, we aren’t talking about it.” The last decade however has seen rapid progress in tackling the stigma and reservations men feel about attending prostate check-ups. There have been two key factors. First, government backed educational campaigns to dispel popular myths and spread accurate information; and secondly, creative campaigns in popular culture – almost any reader will have heard of the popular ‘Movember’ campaign, popularised by football players and other celebrities.

A similar example is the shifting attitudes towards sexually transmitted disease – particularly HIV and AIDS.  Again, successful strategies, as reported by the National AIDS Trust, centralised the importance of access too accurate, expert information through mainstream and popular media; while challenging poor information and negative assumptions simultaneously. In their words “Promote an accurate, reliable narrative in the media that will encourage empathy.” What is unique about this example is its success in tackling ‘self-stigmas’ – i.e. feelings of shame, self-blame etc. Workshops combining skills-building, peer support and opportunities to discuss the stigma and its effects amongst victims proved widely successful – highlighting the importance of victims actively participating in initiatives.

Common themes between these examples such as provision of quality information, myth-busting, campaigns in popular culture (perhaps capitalising on the rapid growth of social media) and the direct inclusion of victims or vulnerable people in peer-based initiatives could all be easily applied in strategies to tackle the stigma on discussing finances and debt – and evidence suggests they would be successful.

Researched and written by Craig Lynch

Previous Essays

Associations between Debt and Mental Health – Outline of Realities

Associations between Debt and Mental Health – Associations & Responses

Associations between Debt and Mental Health – Human Cost Pt. I – Debt and Divorce

Associations between Debt and Mental Health – Human Cost Pt. II: Household Debt and Children