Services that help people overcome problems with debt will drastically reduce from 1 January 2016

  • Print this page

23/12/2015

23rd December 2015 - Access to financial counselling and financial capability services in areas where government welfare recipients are subject to income management, will drastically reduce from 1 January 2016.
 
The areas affected are the Northern Territory, Shepparton (Vic), Bankstown (NSW), Playford, APY Lands and Ceduna (SA), Logan (Qld), outback WA and parts of Perth.
 
FCA estimates that face-to-face services will reduce by at least 50% and sometimes more.
 
For example, in Darwin, there were previously five generalist financial counsellors and one specialist problem gambling financial counsellor. From 1 January, it is likely that there will be just one generalist financial counsellor and one specialist problem gambling financial counsellor. Darwin has high rates of mortgage stress[1] as well as many people on low incomes, including many Indigenous people. There are also likely to be job losses as major projects move out of the construction phase. There is likely to be similar reductions in services across all of the affected areas.
 
Financial Counselling
 
Financial counsellors help people struggling with bills and debts to get back on track. For example, they help their clients to prioritise their debts and to negotiate reduced payments or debt waivers. Some loans are also exploitative and a financial counsellor might lodge a dispute about whether it should have been provided in the first place.
 
The most common causes of financial difficulty are job loss, illness or relationship breakdown. Sadly poverty is also a factor for many people living on Centrelink benefits.
 
Financial Capability Workers
 
Financial capability workers help clients to navigate the banking system, develop budgeting skills so they can pay bills and avoid disconnection from essential services, access government services and avoid scams.
 
Many financial capability workers work predominantly with Indigenous clients, where English is a third or fourth language and have little experience of the banking system.
 
Impact of the Reduction in Services
 
People with debts they cannot pay are often extremely distressed and sometimes suicidal.  The financial impacts may be that they cannot afford food, electricity or rent.
 
The reduction in services will also result in increased demand for emergency assistance in the form of food or energy vouchers. Sadly, there will be flow on effects in some families with increased family violence, traumatised children and health issues. 
 
Indigenous clients in remote areas often have problems in opening or maintaining bank accounts or accessing government services. They are also often targeted by unscrupulous door-to-door traders, rental companies and other scammers. These problems will only increase.
 
 
FCA Comments
 
Financial counsellors and financial capability workers – of all people – understand the need to cut expenditure when a budget doesn’t add up. We therefore appreciate that the Government has to make some tough choices.
 
But we question whether cuts to financial counselling and financial capability services are the right decisions. With dramatically reduced access to financial counselling and financial literacy services, there will be increased costs in other areas of government expenditure.
 
We also note that the tender process for this new funding round managed by the Department of Social Services was problematic.
 

  • The way in which the funding was allocated appeared simplistic.  For example, the same funding is available for the hubs in Alice Springs, Katherine and Tennant Creek. Yet the Alice Springs hub is required to service 37 communities, Katherine has 32 and Tennant Creek 18.
 
  • Agencies are being expected to service very large regions. In one region in Perth for example, some clients would need to catch four buses and a train to reach the hub.
 
  • The Darwin region was originally just one hub. After advocacy from the sector, this was later divided into three hubs. While this was welcome, agencies were not notified of this change. A better approach would have been to re-open the tenders at that point and extend all existing contracts. By not doing this, agencies that did not tender originally because the funding was inadequate, have been disadvantaged. The goal posts shifted for all of the agencies that had tendered - it is difficult to see how this would meet tender probity requirements.
 
  • Successful and unsuccessful agencies were notified by email on 11th November. This allowed just six weeks to close services down, which is not adequate (FCA recommends two months as a minimum). Successful agencies also needed to negotiate contracts with the Department and so their success needed to remain confidential until this process was completed. This meant that unsuccessful agencies did not know where they could refer their existing clients or new potential clients who contacted them in the interim.
 
  • In Rockhampton and Nhulunbuy, the Department re-opened the tender process. Agencies were given just three weeks to tender. This was not enough time given the complexity of the tender requirements and at least some agencies did not tender for this reason.  Agencies that are currently funded in these areas, if unsuccessful, will have just four weeks to close their services.
 
MEDIA CONTACT: Fiona Guthrie – 0402 426 835
fiona.guthrie@financialcounsellingaustralia.org.au
 

 
 
 
 
 


[1] See http://www.afr.com/real-estate/the-top-100-postcodes-at-risk-of-mortgage-default-20150818-gj1gja