It would be a debt disaster

Anglicare Tasmania has joined a national campaign to lobby against the axing of laws that protect people from debt disaster.

The Save Safe Lending campaign is spearheaded by financial counsellors—the people who see first-hand the devastation caused when banks and other financial institutions provide unaffordable and unsuitable loans.

So far, 14,257 people have joined 125 charities, social services, unions and consumer groups, plus dozens of academics, experts, financial counsellors and high profile Australians in signing an open letter to Australian parliamentarians.

You can also listen to what leaders had to say when the campaign was launched.

Since 2009, Australia has had laws that deter lenders from providing unsuitable loans. They also offer vital redress for people when these laws are breached. The Banking Royal Commission recommended that these laws be strengthened, after hearing numerous, and often heartbreaking, personal stories.

Instead, the Australian Government has proposed a draft bill that if passed, would see these laws axed from March next year.

Anglicare’s team of financial counsellors manage the National Debt Helpline in Tasmania. They work tirelessly to advocate on behalf of Tasmanians from all walks of life who find themselves in financial difficulties. They also help clients to learn essential budgeting skills.

“We are in the midst of a recession and the future is uncertain,” says Anglicare Tasmania CEO Chris Jones.

“At Anglicare we’re growing our team of counsellors because we anticipate a rise in demand for financial counselling services because of government decisions to reduce, then end JobKeeper payments and the looming end to loan deferrals and rent moratoriums,” Chris said.

“Unaffordable debt impacts physical and mental health, family wellbeing and the ability to pay for essentials like education and health.”

Read more from Chris in this opinion piece recently published in The Mercury newspaper.

Read the stories of three Tasmanians

Stuart, Ashley and Betty are from different parts of the State, in different age groups and different socio-economic circumstances. Their stories are not unique and they are the tip of the iceberg. They clearly illustrate that the current laws are working, and must be maintained.  We have changed people’s names to protect their privacy.

Case study #1: “Swimming in debt”

At the time he reached out to a financial counsellor because he was “swimming in debt”, Stuart was using six credit cards to cover his basic living costs. He had three personal loans and his mortgage had been moved to interest-only payments.

The current laws give financial counsellors the opportunities to challenge creditors about this kind of debt. As a result, two credit cards were waived and Stuart’s payments on other debts were reduced, allowing him to start getting his finances back under control.

Case study #2:  How an unaffordable loan can quickly escalate

Seventeen-year-old Ashley used her mobile phone to apply for a $250 loan to cover daily expenses that included medication essential for her mental health. At the time, she had been homeless for more than six months and relied on Youth Allowance. After a period of hospitalisation and recovery Ashley was placed into supported accommodation and her future looked bright. However, as she hadn’t made any payments to the lender in 12 months and the interest was high, the debt had escalated to $770.

Ashley contacted the National Debt Helpline. Her financial counsellor sent documentation to the lender and requested a full debt waiver on the basis of unsafe lending. It took another six months, but the debt was successfully waived.

Case study #3:  Why it’s so important for banks to conduct full financial assessments

Betty, 82, had been taken in by an online scam relating to crypto-currency trading. She was coached by the scammer to successfully apply over the phone for a personal loan of nearly $30,000.  Betty then transferred this money to the scammer and was left with the loan repayments. Not long after, Betty was taken in by a second scam. Again, the lending institution she contacted failed to complete the required full financial assessment and increased her credit card limit. Betty handed over more funds over to a scammer.

Betty experienced a mental health crisis and while in hospital a social worker suggested she contact the National Debt Helpline.

Betty’s financial counsellor lodged a complaint with the Australian Financial Complaints Authority. This was upheld; a review of the telephone call clearly showed that she had been coerced into applying for the first loan. It was also clear from every interaction that Betty was experiencing significant mental ill health.

Betty’s story ends well: the personal loan and the credit card debt were waived in full. The financial institutions were held accountable for their failure to conduct full assessments before approving loans or extending credit, as required under the current laws.

Campaign next steps

It’s not yet clear if the Government will introduce the legislation into Parliament later this year or early in 2021. Follow the campaign here.

What more can you do to help?

It’s important that Tasmanians use their voices to oppose the proposed changes. The best way to do this is to join the petition.

You could also:

• write to your local MP or Senators
• write a letter to the editor of your local newspaper
• join the conversation on social media, using the hashtag #debtdisaster and tagging your local politicians.

 Are you worried about your financial situation?

If you’re experiencing financial difficulties, contact the National Debt Helpline TODAY on 1800 007 007. You can read more about this service on the Anglicare website  and at www.ndh.org.au  Remember, financial counselling is a free, confidential service provided by professionally trained and compassionate experts who can also connect you to a range of other services if needed.