All I want for Christmas is to be debt free: survey's surprise results

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More than 1.4 million Australians used debt management services in the past 12 months, according to a new report from the Consumer Law Action Centre (CALC).

Debt management providers (DMPs) or credit repair services are called ‘debt vultures‘ because they often target people in financial hardship with poor quality debt advice and services. They charge upfront fees to help customers negotiate payment plans, restructure debts and repair credit ratings. Many do not hold a financial services licence or a credit licence issued by the corporate regulator, the Australian Securities and Investments Commission (ASIC). Their clients often face issues with bills, home repossession or credit reporting.

Weekly AustraliaNOW research found that DMPs reach a large proportion of Australians with their TV and online advertising.

“Over half (55 per cent) have seen or heard advertising in the past year from companies providing advice or services to people to help deal with debt problems or repair credit reports.

“It’s a dangerous mix: people struggling with bills as a result of COVID-19 but desperate to be debt free, debt vultures promising to ‘help’ fix debt and credit report problems but absolutely no rules on how these companies act – even when their bad advice or eye-watering fees make debt problems worse,” said Gerard Brody, CALC chief executive.

“People are genuinely shocked when they discover the lack of rules and obligations on firms offering debt advice, debt negotiation, credit repair and money management services.

“The federal treasurer has taken a good first step in committing to licensing part of the industry, but this report shows reform must go further by banning upfront fees, introducing a best interests’ duty and covering the whole industry. Anything less would leave gaping holes and undermine the effectiveness of the reform,” said Mr Brody.

Richard Frost, from Quantum Market Research, the company that conducted the surveys, said the desire to be debt free was now a top sign of success in 2020. It rates above being in control of your life, being fit and healthy, raising happy and successful children, having time to do things you enjoy, and owning your own home. In 2000, the top result was being in control of your life, followed by having a good marriage.

Other main findings from the AustraliaNOW report:

  • Up to 17 per cent of Australians surveyed indicated that the COVID-19 pandemic led to or increased the likelihood of them paying for advice/services to deal with their debts or credit report.
  • Two out of five Australians are struggling to pay everyday bills such as energy (22 per cent), groceries (19 per cent), and council rates (11per cent). People aged 18-29 reported being the most financially stressed.
  • 92 per cent of Australians support the introduction of consumer protections used in the UK to protect consumers using debt or credit report services. In the United Kingdom, a company providing debt management services must make sure the advice it gives to people is: a) in their best interests; b) appropriate to their individual circumstances; and c) based on a full assessment of their financial circumstances.
  • 48 per cent of Australians surveyed are more financially uncertain than they have been in the past 10 years.
  • 29 per cent of Australians are not confident they can keep their current job/ hours for the next six months.
  • 44 per cent of Australians fear if the main income earner suddenly becomes unemployed, they will struggle to find work.
  • Australians aged 18 to 39 are more worried about their financial position; feel out of control; feel stressed, sad, uncertain, frustrated, anxious and isolated; struggle to pay their bills; would consider taking out a personal loan.

What is your No. 1 goal for 2021? Are you keeping a lid on your Christmas shopping?

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Written by Will Brodie

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