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Seeing through the fog

The Money and Mental Health Policy Institute (MMHPI) have released the paper “Seeing through the fog” which explores how mental health problems affect financial capability.

This is important for lenders dealing with consumers at all stages of an agreement. Lenders need to have a sophisticated understanding of how consumer decisions can be affected by mental health and the impact that this can have on a consumer’s spending, budgeting and repayment.

The paper sets out that financial capability is made up of ability (the skills and knowledge to perform and understand financial activity) and mindset (the attitudes and motivation to influence financial behaviour). Research undertaken has shown that consumers with mental health problems believe their behaviour changes dramatically during periods of poor mental health. The ways in which mental health made it harder to manage money covered five areas:

1)      Budgeting and numeracy

2)      Form Filling and paperwork

3)      Judgement

4)      Memory and time keeping

5)      Impulse control

MMHPI go on to look in depth at the impact of mental health problems on different cognitive abilities and the psychological aspects of managing money.

One of the areas considered is planning and decision making. Planning and decision making is defined as the” ability to decide on a goal and plot a course of action to achieve it. It involves identifying possible routes…..and weighing up alternative ways of getting there”. It is explained that consumers with Bi-polar, OCD and depression can all be affected by this to varying degrees. The impact being that a consumer with poor planning abilities may be more likely to miss a payment or be unable to afford their financial commitments. There is also more difficulty in dealing with long term financial products such as insurance and pension schemes.

Another area is communication, MMHPI explain that mental health problems can cause fear of communicating or fear of using a particular form of communication. Being unable to communicate properly with lenders can create barriers for consumers and can prevent help and assistance being put in place for consumers who may be vulnerable.

The paper offers a number of recommendations to lenders in dealing with consumers with mental health problems. These range from timely reminders of payments due in a variety of communication formats to “nudges” delivered by smartphone notification or email to help people keep track of spending.

This paper will be particularly interesting for lenders dealing with vulnerable customers and for lenders looking for insight into the realities of mental health and how it can affect financial capability. The paper provides some good examples of different behaviours that can result from varying mental health conditions.

The key message lenders can take from this is not to make blanket assumptions about certain mental health conditions and the resulting requirements for consumers. Lenders need to ensure they have flexible and adaptable solutions for customers and this can only be driven by knowledge and understanding of consumer experiences.

For more information and advice on dealing with vulnerable customers please contact our experts http://consumercredit.dwf.law/the-experts/

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FCA & Consumer Credit Regime DWF help you navigate through the changes.