Middle class hit by debt -
SMH
- Lucinda
Schmidt -
January 21, 2009
Danger signs . . . Tony Devlin sees more people using credit cards in their attempts to stay afloat.
Huge mortgage repayments and credit cards bills are taking their toll.
When Tony Devlin began working in financial counselling more than 20 years ago, the typical client was a low-income earner struggling with addiction, illness, relationship breakdown or unemployment.
In the past 18 months, however, Devlin has noticed a big change in the type of clients coming through the door of the Salvation Army's "Moneycare" service ( 95 Phillip St, Parramatta NSW - (02) 9633 5011) which he manages. There are far more middle-income earners seeking a way out of the desperate cycle of huge mortgage repayments and mounting credit card debt.
"The issues are more complex," he says. "In the past maybe 10 per cent of our clients had mortgages; now it's more like 50 per cent.
"And people try to keep the ship afloat by using more credit cards."
Moneycare is one of 44 community organisations in Australia that employ about 500 financial counsellors to provide free, confidential advice for people who are struggling to pay their bills. (See bottom of this page).
The counsellors are funded mainly by the Federal and state governments. Despite a doubling of funding in last year's Federal Budget (to $20 million over four years) and an increase from the NSW Government for counsellors in that state, the service is stretched.
"We've never been able to fully meet demand," Devlin says. "But the last 18 months have been especially busy - if we doubled our services tomorrow we'd just meet demand."
Other services report similar overwhelming need - and long waiting lists - for their financial counsellors.
Brian Harvey is the chairman of the Financial and Consumer Rights Council in Victoria and manages seven financial counsellors for the Good Shepherd program on the Mornington Peninsula.
The waiting list has blown out to up to five weeks, with the counsellors seeing about 2,000 clients a year and helping another 1,000 by 'phone.
Harvey, who has worked as a financial counsellor for 10 years, also says the demographics have changed in the past 18 months. As well as people on pensions, he is seeing middle-income earners overcommitted on mortgage repayments and credit card debt and struggling with big price jumps for food and petrol.
"They all say: 'I never thought I'd be in this position,' " he says. "It's a fairly big wake-up call."
Harvey does not have enough counsellors to cope with demand. Most work part-time. The issue is reflected Australia-wide, according to Jan Pentland, the chairwoman of the Australian Financial Counselling and Credit Reform Association.
"Our financial counsellors are really stretched," she says. "The doubling of funding in the Federal Budget was encouraging, but clearly it's not enough."
She says there are plenty of people who want to be financial counsellors but without the funding for training and wages, there's no point accepting them.
Those who do become counsellors often do so as a second pre-retirement career. Pentland says they come from a range of backgrounds, including former nurses, bankers, welfare workers, lawyers, teachers and accountants.
They help clients negotiate payment plans with creditors, explain bill-paying options and budgeting and discuss options such as early release of super or bankruptcy.
In Victoria, counsellors must complete a community services (financial counselling) diploma, which was introduced in 2002. This is being reviewed to include more technical components on financial issues.
In NSW, training is undertaken by various welfare organisations as well as the state representative body (the Financial Counsellors Association of NSW). Moneycare's Devlin says the typical NSW course is one day a week for six months as well as sitting in and watching qualified counsellors at work.
"We get lots of calls saying: 'I'd like to be a financial counsellor. Can I start tomorrow?' " Devlin says. "But it's increasingly complex work and needs a fairly considerable amount of training. It's not easy work. You're dealing with very stressed-out people."
Sydney financial counsellor Alick O'Har left a 30-year banking career to train as a counsellor.
He spent nine years with Mission Australia and is now counselling clients for the Wesley Mission's Credit Line service at Fairfield and Campbelltown.
He planned to retire at 55 then 60. Now, at 68, he thinks he'll continue until age 70. "It's not rewarding monetarily but if you can throw one little starfish back in the ocean there's a good deal of job satisfaction," he says. "I like trying to give people another chance."
O'Har's waiting list has blown out to four weeks from one to two weeks a year ago. He also agrees the issues are becoming more complex and he sees clients "from all walks of life", including those with big mortgages and an additional $100,000 on credit cards.
O'Har says the biggest problem is clients delaying seeing a counsellor.
Acting early, as soon as repayments become a problem, leaves more options open to extricate yourself from trouble. "They wait until they're drowning before they put up their hand," he says.
WHERE TO GO FOR HELP
Victoria
* Consumer Affairs Victoria, 1300 558 181, consumer.vic.gov.au.
* Financial & Consumer Rights Council, 1800 134 139, fcrc.org.au.
* Consumer Action Law Centre, 9629 6300, consumeraction.org.au.
NSW
* Credit & Debt Hotline, 1800 808 488, cclcnsw.org.au.
* Financial Counsellors Association of New South Wales, financialcounsellors.asn.au.
EXPERT ASSISTANCE BROUGHT RELIEF
June is in her 50s, works full-time in a clerical role and is divorced. She owned a unit on which she had a small debt to a bank. She wanted to buy a townhouse for her retirement so she approached the same bank and was approved for an additional loan. She bought the townhouse but the market dropped after her purchase and she had difficulty selling the unit. To keep up with the debt repayments she got a weekend job as a cleaner and she also took up extensions on the limits on several credit cards she had. When she came to see the financial counsellor she had a notice of possession on the unit and the townhouse and a string of credit card debts she had run up trying to make the mortgage repayments. The counsellor helped her clarify her position and buy some time from her creditors. She was stressed from the pressure and from working seven days a week. The unit eventually sold but for a low price and she still had a big debt to the bank. After many visits to the counsellor she decided to sell the townhouse and drop the second job.
Source: Moneycare
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