ISLANDERS suffering mental health crises are being left exposed to life-changing financial losses – including one £1.2 million case – with no clear legal protections to undo decisions made while unwell, the head of a charitable organisation has said.
Stephen McCrimmon, co-founder and director of Focus on Mental Illness, said this was a particular issue for people suffering with mood disorders.
Meanwhile, the Channel Islands’ financial ombudsman confirmed he had been made aware of complaints in which people entered into financial agreements without full capacity to do so.
Mr McCrimmon said: “Sadly, I have many examples where people have encountered financial consequences due to decisions made when their mental health was compromised.
“This can be particularly relevant for those who live with mood disorders.”
“I have also recently come across a situation where someone was being denied an inheritance due to not being able to meet their bank’s requirements to ‘unfreeze’ their account,” he added.
A £1.2m loss
Focus on Mental Illness works to support Islanders affected by severe mental health conditions such as psychotic disorders, bipolar disorder, schizophrenia, and severe depression.
Mr McCrimmon described a case involving a person with untreated bipolar disorder whose financial decisions led to losses of £1.2 million for their family.
He said there are practical steps to manage risk, such as encouraging people to set out instructions while they are well for how their finances should be managed if they become unwell – particularly if they start behaving out of character and handling their money in a risky manner.
For those who have previously suffered financial harm during a mental health episode, Mr McCrimmon said an ‘advance directive’ can authorise trusted individuals to intervene or take specified actions if similar symptoms arise again.
“Leeway” needed
The charity co-founder also argued there should be room to reverse transactions or unwind loans made during a mental health episode.
“There should be some form of financial leeway to be able to undo that decision, and there should be some financial accountability for organisations.”
“There should be some safeguards in place that prevent the huge consequences of somebody becoming financially liable for a decision that’s made when they’ve become unwell.”
However, Mr McCrimmon cautioned against measures that would stigmatise patients with serious mental illness.
“People should not be marginalised or persecuted because of mental illness,” he said.
He added that patients shouldn’t be expected to disclose their diagnosis when applying for credit, but that if someone makes a costly decision because they were unwell at the time, there should be a way to protect them or undo the decision.
The aim, he explained, is to protect people from harm caused by symptoms, without treating everyone with a mental-health condition differently.
“It’s about getting that balance right… This is about safeguarding some of the behaviours caused by symptoms of a mental illness.”
The Channel Islands Financial Ombudsman, Douglas Melville, confirmed that complaints have been received from individuals and families who believe they entered into loans, agreements or purchases without full capacity due to mental health issues.
“Heart-wrenching” cases
He described such complaints as “not frequent” but “heart-wrenching” and “low volume but high impact”.
Mr Melville said the issue concerns both capacity and vulnerability and that his office assesses whether outcomes are “fair and reasonable”, including whether lenders carried out proper due diligence and considered the stress that debt can cause.
Mental health director Andy Weir said that such legal protections would not fall under the Mental Capacity Act, but under different legislation.
He agreed that such financial decisions were “a risk for some mental health presentations, particularly mania, when people are elevated and become disinhibited”.
Help on the way?
Help may be on the way, as new rules will soon require lenders to consider capacity and fairness.
Last month, the States Assembly approved reforms to Jersey’s Financial Services Law to bring most personal borrowing of money under the supervision of the industry watchdog and a government department.
A report accompanying the proposal read: “Consumer credit and associated activities will be regulated to strengthen the consumer credit protections provided for in Jersey law.
“Consumer credit activities will be supervised by the Jersey Financial Services Commission (“JFSC”) and Trading Standards.”
The regime allows rules to require lenders to satisfy themselves that borrowers have legal capacity and understand the terms, and to introduce cooling-off/cancellation rights and limits on high-cost lending.
The report added that the new regulations “may include provisions that require persons carrying on wider consumer credit business to take steps to satisfy themselves that consumers have legal capacity to enter into an agreement and understand the terms and conditions by which they will be bound”.
A 12-month transition is planned, with firms expected to register within six months.
A spokesperson from the Jersey Financial Services Commission said they were working “closely” with Government on the new consumer credit regime.
“We aim to consult later this year on a draft Code of Practice for Consumer Credit Business,” they added.
“Our Code will include reference to how regulated firms should deal with vulnerable customers.”
