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What debt distress REALLY costs you

Debt stress. Source: Getty Images

Have you ever been to see a counsellor? Are you familiar with how they operate?

Practicing clinical psychology takes years of tertiary study. Counsellors, while not psychologists, also undergo formal training.

So why is there a need for all this study?

The answer is simple. When you sit down in front of a “therapist”, a very serious exchange occurs – you’re trusting that person with your mental health and well-being.

Financial counsellors are part of this group of health practitioners. Their job is particularly challenging because they need to use both their financial expertise, and counselling skills.

Right now, there aren’t enough counsellors in Australia, and it’s causing great harm… leading some, as I understand, to suicide.

The problem

Australia has a debt problem. The personal debt we carry is among the highest in the world. That’s because too many of us are in insecure work, our wages aren’t rising fast enough, and the cost living is growing.

The latest GDP (economic growth) data shows most of us continue to spend, but only by saving less. The official saving ratio, one could argue, is simply too low.

Instead of cutting back on our spending, we purchase goods and services on our credit cards, and, in extreme cases, use payday loans.

Many are now also struggling with mortgage repayments – especially in Western Australia where many first home buyers are dealing with negative equity (where the value of the property falls below the value of the loan).

The remedy

This is where financial counsellors come in.

Financial counsellors are there to assist those in debt distress shed the shame they feel, provide a way forward and out of their debt problems, and instil a bit of hope and confidence in the person.

When it works, it must be extremely rewarding for the counsellor.

The problem right now, however, is that too many Australians have a problem with debt, and the counselling services simply can’t cope.

Harsh reality

What we’re seeing now are very long waiting lists to see a counsellor face to face. In terms of call centres, in Western Australia, for example, for every call made to the debt helpline, another call goes unanswered.

To be blunt, for every 8,000 people who seek help for their debt problems, 8,000 are turned away.

Here is a list of comments made anonymously to financial counselling agencies in Western Australia via their online feedback pages…

‘The waiting lists are so long’, says one.

Another says ‘I was trying to get through to book the appointment on the phone. I tried 20 times, but I was lucky and got in due to a cancelled appointment.’

And another says ‘please just add more counsellors to help more people in need like my case.’

Kate Rich deals with this mess on a daily basis as a counsellor in Bunbury, Western Australia.

“It’s so upsetting to know that people are trying and trying and trying to get into see us,” Ms Rich says.

It’s my understanding that many Australians, who are already at “breaking point”, are being forced to wait up to 3 weeks to see a financial counsellor.

Kate Rich worries about these vulnerable people.

“Several people who have been in my office have been close to suicide.”

Western Australia is not the only state under the pump.

By volume, the highest number of calls are consistently received in New South Wales, followed by Victoria and Queensland.

A possible way forward

Next week the Parliamentary Economics References Committee will hold an inquiry into financial hardship.

It is essentially a chance for law makers to examine the predatory banks which haven’t been lassoed by the Banking Royal Commission.

The CEO of Financial Counselling Australia, Fiona Guthrie will be appearing before the Committee.

Ms Guthrie has told me she will be presenting a case to the inquiry for another bank levy to help support and expand the financial counselling sector in order to meet the overwhelming demand.

“We’re proposing that the people who cause the problems, and people who benefit, when financial counsellors help people get back on track, help pay for the services,” Ms Guthrie says.

The bank levy to fund the financial counselling sector is already up and running in the UK.

The levy is collected by the Financial Conduct Authority. It’s a levy on financial institutions, banks, building societies and others, and it pays for a number of services, including some debt advice — so around 56 million pounds worth of debt advice is paid for by that levy.

Fiona Guthrie will drawer on that example, and in doing so, will also direct law makers to the potential economic benefits of a levy for the government.

And in the meantime?

For those who have sought help and still can’t get through to a counsellor, financial counsellor, Kate Rich, says there are still plenty of online resources that can help.

“The money smart website, and the National Debt Helpline website, for example,” she notes.

I guess the next step is making sure those in debt distress have decent wi-fi to be able to view these websites, and enough education (financially literacy) to make sense of the information they receive.

It’s in everybody’s interests to help those in debt distress… as painful as that may be sometimes. More needs to be done.


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