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New Debt Law

Are you a debtor who has been feeling overwhelmed because of debt letters and how intimidating they can be? As far as I’ve observed, that is a common problem that plagues debtors across England and Wales.


However, the government has recently introduced a new debt law that is  making things significantly easier than before.

That is what I’ll be discussing in this guide. Let’s get right into it.

What is the New Debt Law?

The new rules surrounding debt have been designed to make it easier for people in debt to manage their debts, to make debt letters more simple and easily discernible, and to help debtors understand their situation better.

Let’s get into a discussion of what these new rules entail.

The government is taking an active step to help people with their debts by making debt letters that debtors receive from their creditors much easier to understand.

For a bit of background, most debtors receive these letters from their creditors when they are struggling with debt management and are seriously behind on making their debt payments.

What Changes Do These New Rules Bring About?

This section will address the changes that these new rules call for that help make debt and debt letters easier to understand.

  • Changes in language and presentation

As per the new legislation, debt letters will have an updated presentation and look that will be less harmful to the mental health of the recipients. 

A big issue that comes about when these letters are sent to people is that they often have a negative mental impact on people because of how intimidating they appear. That has been legislated against and will change.

  • Text presentation restrictions

Secondly, the new legislation prohibits creditors from excessively making information prominent in the letter to make it look intimidating and threatening.

The rules also state that creditors are required to use underlined or emboldened text instead of using capital letters and words.

  • Mentioning debt help sources 

The new laws give creditors the freedom to use generic, easily understandable words instead of capital letters and words. Also, creditors are encouraged to refer debtors to good, reliable sources where they can get free debt advice.

The Need For New Laws

You may be wondering why exactly these changes have been brought about and why they were needed. This section addresses those concerns.


By and large, the biggest issue with the presentation of information on letters pertaining to news about loans and notifications was the intimidation factor.

Very often, letters would be worded in a manner that was very harmful to the mental wellbeing of the recipients. 

The second reason why these laws were needed was because the nature of legislation surrounding this issue had remained unchanged for around forty years, and according to many, had run its course and become stagnant.

That’s why a reassessment of these laws and their usefulness was needed. With the new changes, letters have become much less threatening, much easier to understand, and much less confusing.

The biggest positive impact of that has been with regards to debt management and debt collection. A lot of people face severe difficulties in managing their debts and planning ahead because of the confusing nature of letters.

FAQs

  1. How have state departments responded to these changes?

John Glen, Economic Secretary to the Treasury, released a statement empathising with people who owe money and how the new laws can help them better understand and manage their debts.

He also talked about how this will empower people with regards to their finances and will make things simpler and easier than ever before.

Eric Leenders, Managing Director, Personal Finance at UK Finance said that the banking industry stands behind debtors and can understand their difficult situation. Moreover, he mentioned that these laws will bring about significant positive impacts for borrowers.

Finally, he also commented on how the news means that these laws will ensure that the path of communication between debtors and creditors, with regard to debts, will be much more clear and well-defined than before. 

  1. Who is this law the most likely to help?

This law is most likely to help vulnerable borrowers who can easily be fooled and lied to. It helps people who don’t understand technical jargon and people who are taken advantage of by money-hungry creditors.

It is also very likely to help borrowers who are not aware of loan help, what it is, where they can get it, and how it can help them. The law encourages creditors to mention free loan help sources to creditors, which can create a huge positive impact for unaware borrowers.

  1. Do these laws make loan management easier for me?

Yes, they do.

Debtors who struggled with technical terms and jargon they couldn’t understand in letters will now be given much simpler, easier letters with sentences and terminology that is easily understandable.

Moreover, getting advice is a big part of loan management. The new laws encourage creditors to mention the best loan advice and loan help sources they are aware of in their letters to debtors.

Once creditors start mentioning free loan help sources in their letters, a lot of debtors who are unaware of loan help and where to get it will be helped tremendously.

  1. Are my letters going to be less intimidating from now on?

Yes, the new rules ensure that letters to borrowers are less intimidating to a great degree.

For one, there won’t be threat-laden passages that mention court action or aggressively toned sentences to cause mental anguish to borrowers.

Secondly, the path for communication for borrowers will be much more clear and defined.

  1. What does the Money and Mental Health Policy Institute charity have to say on the matter?

The institute praised the new laws, stating that this is a significant milestone for loan-induced mental stress, and that these new laws would tremendously help people in confusing circumstances.

An acknowledgement of the fact that thousands of people across the UK attempt suicide as a consequence of debt-induced stress was also made.

Wrapping it Up

These changes were expected to come into force in December 2020. After that, all creditors will have to implement the mentioned changes within six months.

I hope this guide helped you understand the nuances behind the new legislation, how it makes things easier for debtors, what it expects lenders to do, and what stakeholders see this as good news for loan management.

If you need more help or need more information on debt charities, feel free to reach out.

About the author

Scott Nelson

Scott Nelson is a financial services expert, with over 10 years’ experience in the industry, including 6 years in FCA regulated companies. Read more
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