'Mental Capacity and Debt, new OFT consultation' blog discussion

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  • Credit Reference agencies can be used here and all lenders should be obliged to consult them. Or the debt, if not registered , would be unenforceable.

    A notice would be displayed that an individual needs any credit agreement countersigned by....whom so ever.....

    There should be a form which a registered carer can get completed and have it signed by either a doctor or social worker and the credit reference agencies would have to show that the individual is vulnerable.

    In fact a person who is doubtful of their own ability should be able to simply have themselves registered for their own protection.

    The details would need to be refined of course but having worked for many years using credit reference agencies as part of my work in a company which offered credit. I know that there would not be a huge difficulty in sorting it out. Although the credit reference agencies would, in the first instance be a little overwhelmed by the number registering, once a procedure is in place then there would be little difficulty.

    A small fee of about £5 for each registration would be more than sufficient and it would be a small price to pay to protect the vulnerable. However there are some lenders who do not consult a credit reference agency because they specifically lend to those with a poor credit history. They do charge more for loans because of the higher risk. Credit reference agencies charge for each 'check' so it may well be that they will earn more charging the normal fee for each check. If all loans had to be 'checked' to make them legally enforcable.

    I have a relative who is vulnerable and they were coersed into taking out a loan from a well respected company, who collect payments on a door to door basis, by a third party who befriended them. Fortunately I discovered this and when I got in touch with the company I was told that their representative was out of order accepting the loan because the relative was obviously not capable. Apparently there are rules already in place about this for certain members of our society. In short the loan was written off.
  • Ames
    Ames Posts: 18,459 Forumite
    In my case, when I ran up a lot of debt the clue to the fact that I couldn't afford to repay it all should have been that I was on benefits. When I came down from that phase and called to try and sort something out they said that I shouldn't have been approved for the loan in the first place, but still had to pay. Cue suicide attempts because of the debt.

    I really don't know what the answer is though. My credit rating was fine because it was the first time it had happened so I didn't have previous credit to have defaulted. My parents have refused to take power of attorney or anything like that because they don't understand why I have problems with money. Probably just more rigourous checks that the applicant can actually afford to repay the debt, although I suspect that's the case now anyway because of the recession.

    It's definitely better to prevent this problem in the first place than to leave people struggling with debt they weren't in a position to understand when they took it out.

    Trying to sort the problem afterwards just causes more problems. I was told by a couple of CAB advisors on these forums that I should look into getting the debt cancelled, and my GP agreed. But my local CAB refused to even try. In fact, they scared me into paying back debts I didn't even owe! (Council tax, which was under review because they'd made a mistake, CAB said I could go to prison if I didn't set up a deduction from my benefits, getting the council to give me back the money when they accepted I didn't owe it took ages). CCCS did a budget but took my DLA into account as income and didn't allow me care needs as an expense. So the debt charities and advisors need to be aware of disability issues too.

    It's not just debts that are a problem though, I gave my card details out to someone over the phone claiming to be from a charity - I have real problems using the phone due to my MI, and would have agreed to anything to end the call quickly. I've also got contracts that I want to end but it means phoning up to do so, so I'm spending money I don't want to spend because of that (I didn't realise when signing up for a free trial that you had to phone to stop it). And I wince at the amount of money I wasted paying for things like water rates which were three times higher than I now spend on a meter, just because I couldn't bring myself to phone up or let someone in the flat to change it.

    So MI leads to a whole host of financial problems, not just debt.
    Unless I say otherwise 'you' means the general you not you specifically.
  • chattychappy
    chattychappy Posts: 7,302 Forumite
    No doubt it will open up a whole new industry of dodgy law firms offering to get debts written off if you can say you weren't well when you signed something. No doubt some will succeed when it turns out that some firm's procedures didn't quite measure up to the gold-plated standards expected by the FSA. At the same time, there will be other taxpayer funded quangos expressing "concern" and "consulting" about what impact all this will have on disabled people. Why should someone be denied credit because they are mentally ill etc.

    So endless consultation, discussion documents and enquiries by public bodies spending tax payer's money. The result will be extra compliance costs loaded into the cost of credit.

    I'm sure there is a problem - but this sounds like another step down the road to a nanny state to me.
  • psdie
    psdie Posts: 126 Forumite
    Reaper wrote: »
    I'm thinking a vulnerable person could agree to require the signature of a second person (eg a close relative) on all financial contracts. The contract would not be valid or enforcable unless both people had signed.

    This seems like a sensible, practical measure; although how does one ensure the counter signature is legitimate?
    Reaper wrote: »
    Companies would be able to look up whether a second signature is required. A new register would be one way but even simpler would be to just flag it on existing credit reference checks.

    Personally I'm tempted by the idea of requiring counter-signatures for ALL contracts that require on-going payments, regardless of supposed mental capacity! It adds a slight hassle when signing (if one lives on their own, they'd have to take it to a friend or family member, but most could ask their partner to sign), but encourages seeking of a second opinion and helps avoid spur-of-moment decisions that can be ill-afforded.

    Slightly tongue-in-cheek, but makes you think when you consider how many people appear unable to make sensible financial decisions - not just those with obvious Mental Capacity issues.

    On a separate note related to this issue: my partner in her work as a probate officer came across a case where an elderly woman died and it emerged she'd taken out numerous crippling loans in the name of her Mentally Incapacitated husband without his knowledge, which he was then left with. Lovely. :(

    Oh, and +1 to chattychappy: the focus needs to be on preventing unaffordable loans / contracts being sold to those with limited MC, not on writing off existing loans. The latter is certainly open to abuse, so should be reserved for only the most extreme, provable cases involving those with *severely* limited MC.
  • pixwix
    pixwix Posts: 122 Forumite
    First Post First Anniversary Combo Breaker
    I have an adult son with recurring mental problems, including severe depressions and personality changes. Apart from the obvious problems, my family has found out the hard way that between publicly-stated policies and actual action there's an immense gulf. Especially with people who are mentally ill but not regarded as legally incompetent.

    I won't go into details of a system that has failed him as an individual and us as a family continually over 2 decades. Suffice to say it has our family (my wife and I are retired and disabled) beggared both financially and emotionally. A familiar enough tale I dare say for 1000s of other families in the same boat in our supposedly 'caring' society.

    When the subject of the mentally ill and enforceable debt first started coming up a while ago, I made repeated enquiry, but found little solid help or advice from any direction.

    So I'll be impressed with this latest development when I see the slightest sign of positive action instead of just talk.
  • simpywimpy
    simpywimpy Posts: 2,384 Forumite
    First Anniversary Combo Breaker First Post
    The whole lending system needs bringing up to standard. I agree that for those with mental health issues, a flag on their credit report should be there to alert lenders of a second signature.

    Banks who offer people money that they clearly will never be able to afford to repay based on their known earnings should be made to void the whole thing and absorb the loss. At least then they might think twice about offering tempting amounts of money to those who can't afford it.
  • we have constant battles to get any knowledge of who should be helping our son...in 22 years we have 'heard' of some organization just to be told he does not fit their criteria. the council is the worst!
    We would like to take control of his financial affairs for his own good...but the court option is now too expensive.
    He is into every new electrical gadget, and soon takes them to the Local Cash Generator who give him nothing for them...despite our numerous letters appealing to them that he is not capable...
    now there is the threat that he will loose his ESA and be re-assesed...we suffer as much as he does, he wants to work but he has absolutely no chance of doing so. His future is so unclear and we worry so about who will be there for him when we are not...whatever is thought to has to be resolute, adaptable to all and lasting...not for just one term in office!!
  • As someone with bipolar disorder, I'm concerned that any legislation that enables people to say "I'm bipolar, you shouldn't have lent this to me/ sold this to me etc. will mean that I won't be able to get credit or buy significant things. It's a double-edged sword.
  • melroccan
    melroccan Posts: 147 Forumite
    edited 15 December 2010 at 11:24AM
    My son was in a mental hospital under section and wrote all over the walls as he was paranoid that his letters to the psychiatrists weren't being answered and wanted a permanent record! When he was discharged he received a bill for repainting the room - £450!! He has Bipolar Disorder which was yet to be diagnosed at the time. To add insult to injury when he was readmitted the chap in the next room said it had literallly taken a man with a big roller ten minutes to do it. No wonder the NHS is in trouble if they are paying that sort of money to paint a small room Magnolia. And no wonder people with Bipolar Disorder run up huge debts if even a mental hospital doesn't understand he was not responsible for his actions as they were due to his mental state at the time.
  • churchrat
    churchrat Posts: 1,015 Forumite
    At least this is now seen as a problem and people are talking about it. I support my cousin who has a learning disabilty to live in his own home. If I didn't, he would still be living in his own home without any help at all. Soc Services are no help at all, they say that because he is fairly clean he is fine!

    He is easy prey to those that knock on doors, to identity theft, will agree to anything if you ask him nicely and thinks that if he is offered anything in a shop it is a gift and he does not have to pay for it.

    It is very, very hard looking out for someone like my cousin. I do not live near him and its a constant worry. I feel for every parent in this situation as it must be a complete nightmare.
    LBM-2003ish
    Owed £61k and £60ish mortgage
    2010 owe £00.00 and £20K mortgage:D
    2011 £9000 mortgage
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