Sydney
Payday loans and cost of living: When Scott fell into debt, he couldn’t be “proud” to ask for help.he is not alone
Scott Futcher started looking for a loan eight years ago when he needed to pay electricity bills and a security deposit to move house.
The 41-year-old, who lives near Newcastle, NSW, remembers searching Google for payday loans.
He ended up with multiple small loans, leaving him with about $10,000 in debt he couldn’t pay.
Initially, he said, “I was too proud to ask for help.”
“I knew I was the one who did it. I put myself out there. I should put myself out there,” he told Insight.
“Deep down, you are ashamed of yourself.”
Scott isn’t alone in his experience.
According to the latest Australian Bureau of Statistics (ABS) figures, average household debt increased by 7.3% to $261,492 in 2021-22. Gross household disposable income increased 3.7% to $139,064.
Kristen Hartnett is a financial counselor and national manager for the Salvation Army’s Moneycare services. She said shame around debt and financial worries is common and one of the first emotions people have.
“The first thing they say is, ‘I didn’t know you were here,’ ‘I never told anyone about this,’ or ‘I feel ashamed of the situation I’m in.’ ‘There is,'” she told Insight.
Kylie Holford, a financial counselor in Midwestern New South Wales, agrees.
“I have been in financial counseling for almost nine years, and the majority of my clients feel insecure and embarrassed about their financial situation if they come to me for help,” she said.
What is Financial Shame?
Holford explained the term as the shame people feel about their inability to manage their finances.
“Most Australians are not raised to talk about their finances,” she said.
“There is also an underlying idea that we should all know how to manage our finances. [that]”
Hartnett said it’s common for people to take “great responsibility” for the situation they’re in.
“You often see them being ‘responsible,’ but the reality is that most of the time they have little control over them,” she said, citing unemployment and broken marriages. I put it out.
“I see people blaming themselves very harshly for situations like that.”
What Causes Financial Stress?
Ms Hartnett said people are seeking financial assistance due to the burden of living expenses, housing, and an increase in people exhibiting experiences of domestic violence and domestic violence.
Last week, the Reserve Bank of Australia (RBA) It was the highest level since September 2012.
The RBA is trying to curb spending to stem inflation, which rose to 7.8% in the year to December, its highest rise since 1990.
Hartnett said those pressures are pushing people to turn to easy-to-access, costly credit options such as payday loans.
“Once the payday loan access cycle is down, it’s easy to access, but it’s hard to negotiate at your level, and fees can blow away,” Hartnett said.
The ‘Booming’ Payday Loan Industry
“Everything was new at first,” Scott said of his experience with the payday loan.
“When these payday loans come up, we start at the top, work our way down, and start applying.”
Scott was working part-time at the time and was paid by Centrelink. He failed to secure a bank loan.
According to him, the process of applying for such a loan was all online and required uploading a series of documents such as bank statements and employment status checks.
“In my opinion, I don’t think they did a full check. It was very quick. They said, ‘You’ve been approved for a loan,’ and the money was in yours in about an hour.” It will be credited to your account,” he said. He said.
“That’s why I fell in love with the whole thing. Instead of looking for another way to make money, this one was easy, so I just kept going.”
Scott was initially loaned $500, but says he gained access to more money with that loan through an “additional loan.”
“More bills will come and you’ll think, ‘I’m going to have to take out another loan to pay for it.’ I have to take out a loan for 2000,” he said.
However, he was unable to come forward. Scott has acquired multiple loans with 7 to 1 lenders.
He says he found himself about $10,000 in debt.
According to a recent report from a national coalition of consumer advocacy groups called “Stop the Debt Trap,” payday loans are high-cost, quick loans of up to $2,000 that are paid off over a period of 16 days to 12 months. is.
Also known as Small Credit Agreements (SACCs), they can attract significant fees on top of the original loan, with equivalent annual interest rates ranging from 112.1% to 407.6%, according to a 2019 report.
“The high-cost payday loan market is a multi-billion dollar industry in Australia, pushing hundreds of thousands of Australians into debt traps,” he said.
About 1.77 million households took out more than 4.7 million payday loans between April 2016 and July 2019, according to the report.
These loans provided the lenders with net income of approximately $550 million.
In 2019, total payday loans reached $1.7 billion.
A recent NAB study found that payday loans were the third most common type of debt used to deal with financial hardship in the third quarter of last year (after credit cards and borrowing from friends and family). ) was. One in 10 of her Australians in hardship took out a payday loan in her three months to November.
Payday loans were the most stress-inducing of all debts, surpassing loans from family and friends, personal loans and mortgages. During that time, Australians owed an average of $6,200 on this type of loan.
Holford said payday loans had “dramatically” increased the number of people seeking financial assistance.
“In the last few years, they’ve really taken off,” she said.
“What happens with a lot of these payday loans is that they are essentially unregulated. ”
Late last year, Congress passed reforms to tighten the national credit laws that apply to payday loans and consumer leasing.
Consumer groups have welcomed “long overdue reforms” they say will prevent consumers from falling into the debt trap.
Holford said the new protections, which are expected to come into force later this year, will cap the amount people can borrow and ensure that payday lenders can check a borrower’s ability to repay.
“We hope the new regulations will go a long way in protecting the most vulnerable,” she said.
What are the effects of financial shame?
Hartnett said financial shame often slows people down from seeking help and “paralyzes” them when making decisions in other aspects of their lives.
“When people are ashamed of their financial situation, they often think it’s overwhelmed and incompetent in other areas, but that’s clearly not the case,” she said.
“That shame can undermine their competence and self-esteem…and it affects relationships and health.”
In 2022, Insight explores how people get into and out of debt.
Holford said mental health and financial hardships can be “going hand in hand.”
“People say they can’t sleep, it’s in their head all the time … They say they don’t feel like answering the phone, they don’t want to look at their emails,” she said.
“That constant fear can really affect people’s mental health.”
Scott says his mental health deteriorated from his experience and he began to have suicidal thoughts.
“But I started telling people about it, and it worked, so I’m glad I did.”
What are some ways to handle it?
After confiding in a friend, Scott contacted the Salvation Army’s money care services.
“It was the first day I got my life back. It’s taken a few years. But I can actually see the light at the end of the tunnel,” he said.
Financial Counseling Services went to the National Financial Ombudsman on Scott’s behalf on a complaint that a creditor had provided an improper loan.
Scott made his final payment last week after reaching an agreement to collect only the remaining amount of the original loan and forgo interest and late feed.
“I’m no more in debt. I feel good. I feel like crying again.”
Both Hartnett and Holford encouraged people experiencing financial hardship to contact free financial counseling services for support.
Hartnett said that surviving hardships requires identifying and accepting what is beyond a person’s control.
“The cost of living, for example, is really out of our control. What’s in our control is where we can fine-tune our weekly spending,” she said.
“We recognize that navigating the financial system and circumstances can be overwhelming for people when they are experiencing high stress.”
Ms. Holford encouraged family and friends who may know a loved one’s financial situation to start a conversation with them.
“Listen to them and ask if they need help, and if so, just potentially help them find the right help they need,” she said.
“Always open the way”
Scott continues to deal with cost of living pressures, but says he has a “reasonably happy life.”
“Back then, I wouldn’t have a roof over my head now. But now I just go to the stores and look for bargains,” he said.
“Like all people who are struggling, I don’t make a lot of money, but without a loan, I see where the money goes.”
He encouraged others who may be experiencing financial difficulties to seek help as soon as possible.
“There will always be a way,” he said.
Readers seeking crisis assistance can contact Lifeline at 13 11 14, Suicide Call Back Service at 1300 659 467, and Kids Helpline (for young people up to 25) at 1800 55 1800. More information and support on mental health is available at: and at 1300 22 4636.
Support people from culturally and linguistically diverse backgrounds.
Those experiencing financial hardship can seek help from the National Debt Helpline on 1800 007 007.you can find more information .
https://www.sbs.com.au/news/insight/article/when-scott-turned-to-payday-loans-he-fell-into-debt-he-was-too-proud-to-seek-help/nls314bw3 Payday loans and cost of living: When Scott fell into debt, he couldn’t be “proud” to ask for help.he is not alone
