Are you vulnerable?

We’re often taught in life to hide any sign of vulnerability as much as possible. It’s often due to the fear that someone might take advantage of the situation. But when it comes to dealing with creditors or debt collection, being classed as a vulnerable person could help a lot.

It’s not about being defined as weak or incapable. What it means is that you might be finding it harder to deal with your debts for a wide variety of reasons. And that anyone involved in collecting that money will be required to take additional care and understanding in helping to resolve your financial problems.

That may mean a change in how you’re contacted, a break from payments, or being able to have a friend, family member or support worker to help deal with everything. The Financial Conduct Authority requires any organisation that it regulates to have clear and effective processes to identify and support anyone vulnerable.

It can be a temporary situation, giving you the time and space to get back on track. Or it may be permanent, in which case you should find it easier to sort your debts out for the long-term. In either case, there’s no benefit in hiding reasons why you might find it harder to cope. You’re just shouldering even more of a challenge for no reason.

And it’s relatively quick to do, especially in writing. We’ve prepared a DebtBuffer “I’m vulnerable” letter to help you, or someone assisting you, know what to include.

What counts as vulnerable for financial matters?

There’s no strict definition of vulnerability for creditors or debt collectors. Individual people can find it hard to cope with debt problems for a variety of reasons. So, there’s a broad range of situations or conditions which could see you classed as in a vulnerable situation.

The FCA classes it as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”. And they also refer to people as potentially vulnerable, vulnerable, and particularly vulnerable depending on the circumstances at the time.

Even if you’re managing reasonably well at the moment, it can be worth disclosing any potential reasons for vulnerability as early as possible in the process. You can only benefit from extra consideration while things are OK, and it means you don’t have to contact everyone if your situation deteriorates for any reason. If you tend to go through good and bad periods of mental health, for example, it’s easier to communicate your needs when you’re feeling relatively well.

Some of the reasons to be considered vulnerable include:

• A recent bereavement
• Long-term or terminal illness
• Chronic long-term conditions
• Dementia or brain injury
• A relationship breakdown
• Redundancy
• Mental health problems
• Difficulties in communicating, including reading, writing or speaking on the phone
• Learning disabilities
• Addictions
• If you’re disabled
• Age – usually if you’re under 18, or over 65.
• If you have children or you’re pregnant, particularly if you’re a single parent
• When you’ve been a victim of crime.

This isn’t an exhaustive list, and if you’re experiencing a situation which you believe makes you vulnerable, you can get advice from any of the debt charities or debt help organisations.

If your vulnerability makes it hard for you to discuss it with anyone, you can ask a carer, friend or family member to act on your behalf. And if you’re helping someone that’s vulnerable, you should be able to explain that and be able to help with resolving their debt problems.

For anyone that needs or wants to have someone else legally able to act on their behalf, it’s possible to grant them Power of Attorney. The exact type will depend on your situation, and you should seek specialist advice before going ahead. It’s not a decision to rush or be pressured into.

And remember that data protection laws should ensure that your information is kept private and confidential. If a company breaks the rules on data privacy, you should make a complaint, and we’ve written a guide explaining how to do that.

How can you help a vulnerable person?

If you know someone who might be struggling to cope with their debts, there are a variety of ways to help them as a partner or spouse, family member or friend. It’s not about paying off their debts for them, but just reducing the stress and difficulties of dealing with financial problems.

In many cases, it’s important for a vulnerable person to feel that they’re taking back control of their debts and finances. And that they’re able to manage with a little bit of support. So, you might well find that your help is less and less necessary as time goes by.

Ways that you can help a vulnerable person include:

• Help them to get in contact with a debt support charity or organisation, either by phone or online.
• Contact their creditors to disclose the vulnerability. You can use our DebtBuffer letter template to make it easier.
• Reading through paperwork and helping them to understand it.
• Organising important paperwork and information they will need, including creditors, debts, account numbers, and payment amounts.
• You can also agree to let them add your name to debt support accounts, which means you can speak to them on behalf of the individual. And you can do the same with their creditors.
• Taking on a legal power of attorney to act on their behalf temporarily or permanently

You won’t become liable for the debts of someone else, unless you take out joint credit, act as a guarantor, or formally take on other legal responsibility. Helping someone to understand and work through managing their finances doesn’t make you accountable for paying anything.

What if you need to supply further evidence?

You may be asked for proof that you are vulnerable. It may not be pleasant to have to share further details, but it can still be worth doing. Especially if you’ve progressed beyond initial missed payments and defaults to more serious debt enforcement.

Some of the additional documents you might share include copies of the following:

• A doctor’s note explaining any illness or disability.
• A DWP or Social Services letter about any benefits.
• Council tax bills showing who lives in your home.
• A debt and mental health evidence form (DMHEF)

You should always send copies rather than the original documents, and ask for free “proof of posting”, or send them recorded delivery, to ensure you can prove when they were sent.

A DMHEF allows information to be sent from your doctor or another health professional to your creditors, and is recognised by the FCA. You’ll need to give the form, along with a signed consent form to a doctor, nurse, psychologist, psychiatrist or social worker. You shouldn’t be charged a fee for someone to complete the form for you.

Again, your information should be kept in accordance with data privacy laws. And if that’s breached, you should complain or escalate the issue with the appropriate trade bodies or ombudsman. You can find a guide on complaints, here.

How should creditors and debt collectors treat vulnerable people?

There has been increasing awareness and importance given to supporting vulnerable people by creditors, debt collectors, and the organisations that regulate them. You should find that many will be a lot more understanding than you might expect.

For example, the Financial Conduct Authority handbook for the companies they regulate (including most creditors and debt collectors), states a firm must establish and implement clear, effective and appropriate policies and procedures for:

“the fair and appropriate treatment of customers, who the firm understands or reasonably suspects to be particularly vulnerable.” (Conc 7.2)

Often, they may also have specialist teams to speak to vulnerable customers. Help can include changing the way they communicate with you, or offering you a payment holiday. The FCA also recommends organisations follow the Money Advice Liaison Group’s “Good Practice Awareness Guidelines for helping consumers with mental health conditions and debt”

This suggests lenders should:

• Make sure people with mental illness are treated fairly
• Work with health care professionals and money advisers
• Only take court action as a last resort
• Consider writing off a debt if the person is unable to pay due to their illness

It’s possible that creditors may write off debts due to a vulnerability, such as terminal illness. This tends to apply in cases where creditors can be convinced it’s not financially worthwhile for them to continue collecting the debt.

How should bailiffs treat vulnerable people?

One of the biggest causes of stress and concern for people in debt is the thought of bailiffs arriving to seize property and belongings. And that worry will only be greater if you are already suffering with illness or mental health challenges.

Fortunately, the Ministry of Justice has set out the ‘Taking Control of Goods: National Standards”, which puts clear limits on what bailiffs and enforcement agents can do if they’re dealing with a vulnerable situation.

This includes not entering property if the only occupants are vulnerable, or under the age of 16. A bailiff or enforcement agent also may not take control of goods if a child or vulnerable person (or a combination of both) are the only people present.

In addition, bailiffs are not allowed to enact civil enforcement on any vehicle or car displaying a valid disabled person’s badge, or take anything that helps with your health (or threaten to do so). And they also aren’t entitled to cover fees or expenses unless they’ve ensured a debtor has adequate opportunity to get assistance and advice.

What this all means is that if you make bailiffs, and the creditor for the relevant debt, aware that you are vulnerable, the debt should be passed back to the creditor, and the bailiffs should cancel future visits so that a more suitable arrangement can be put in place.

This may mean ensuring that no-one in your house opens a door to bailiffs or invites them in. But if you register your vulnerability at an earlier stage in the process (bailiffs are usually only involved after court action), you may well be able to avoid it completely.

HMRC Direct Recovery of Debts and vulnerability

HM Revenue and Customs is one of the only organisations that may employ bailiffs without prior court action. But they also have a relatively new measure introduced in 2016 for targeting anyone who repeatedly refuses to pay tax.

Named Direct Recovery of Debts (DRD), it enables HMRC to take money directly from bank and building society accounts, providing certain conditions are met. The key thing to note is that those affected will have the means to pay.

Again, the DRD legislation includes the same potential conditions for someone to be declared vulnerable. In these cases, a HMRC official will decide whether it affected your ability to deal with your tax affairs, and to what extent.

If you’re judged to be unable to deal with the process, then alternative support will be given to help you pay in a different way. If you’re able to understand the process but disadvantaged, then you may have the DRD procedure delayed or reduced.

Alternatives, if you’re not deemed vulnerable

The debt process can be stressful for anyone. And if you feel that you should be deemed vulnerable but it isn’t accepted by creditors, debt collectors or bailiffs, then it can seem much worse.

But there are still a number of ways to minimise the amount of contact from creditors, and to protect yourself from escalating debt problems.

Many people choose to enter into a voluntary Debt Management Plan (DMP). Although this doesn’t legally prevent anyone from contacting you or taking further enforcement action, it significantly reduces the likelihood. You can arrange a DMP through a number of debt charities or private companies, and make one affordable payment which they will distribute to the people you owe. You can find out more about DMPs in our guide.

An alternative is an Individual Voluntary Arrangement (IVA). Despite the slightly misleading name, this agreement is similar to a DMP in that you make one monthly affordable payment. But it’s legally-binding, and all communication from creditors will go to the Insolvency Practitioner managing your case. The downside is that there are more restrictions on eligibility, and on your monthly budget, but this should take into account any costs associated with illness etc. You can see more on an IVA, here.

Although it can sound scary, bankruptcy or a debt relief order can also stop creditors from contacting you or being able to take most types of court action. And it will normally end after a year, whereas an IVA will typically be around five years, and a DMP can be significantly longer.

With an IVA or bankruptcy, any debts covered in the agreement and not paid back by the end of the period, will be written off. Which means you’ll be debt free.

The next steps for anyone in debt and potentially vulnerable

If you take anything away from this guide, hopefully it’s that there’s no shame or embarrassment in declaring yourself vulnerable to creditors, and that you should do it as early as possible in the debt collection process. This means you can avoid the added difficulty of trying to sort things out further down the road.

Many creditors, and even bailiffs, should be reasonable about your situation. Particularly as standards of care and consideration are enshrined in law, and those breaching them can face fines, suspensions or even be unable to work in financial services in the future.

The process is also fairly easy, as you can use the DebtBuffer ‘I’m vulnerable’ letter to inform creditors of your situation. And if you are struggling with admitting your circumstances, it can be done by a friend, family member or carer, who can also help you to manage your communication and debt arrangements.

It’s unlikely that being classed as a vulnerable person will mean your debts are written off, except in the sad case of terminal illness. But it will mean you get more time and consideration to help you find an appropriate solution. And it also ensures that you have more protection if your debt problem does escalate.

The most important thing is to ensure that dealing with your debt problems doesn’t make the reasons for your vulnerability worse. Financial issues are linked with impacts on mental and physical health, particularly for those suffering with anxiety, stress or depression. It can even lead to issues such as PTSD occurring. So, it’s really important to protect and take care of yourself as quickly as possible to ensure that you can resolve your debt issues with the least impact on your wellbeing.

Taking care of yourself means you’ll be in better shape to deal with your debts. And to enjoy the financial freedom when everything has been settled.