FCA welcomes today’s announcement by Labor that, if elected, they will set up a Financial Rights Fund and that a large share of this fund will go toward doubling the number of community-based financial counsellors (from 500 FTE to 1,000 FTE).
Financial counsellors provide advice and advocacy to people with money and debt problems. The large majority of the clients of financial counsellors have debts with the banks, especially credit cards but also mortgages and personal loans.
As Commissioner Hayne noted in the final report of the banking Royal Commission, there is an asymmetry of knowledge and power between consumers and financial services entities. Too often people, particularly those who are vulnerable, need assistance in understanding our complex financial system and negotiating with financial institutions.
The majority of consumer witnesses in the Royal Commission were supported by financial counsellors or community lawyers, and we often work together. The Commissioner described our services as a “necessity to the community”.
Financial counselling is a free, confidential and independent service. Financial counsellors always act in the best interests of their client.
Demand for financial counselling exceeds supply. FCA’s October 2018 survey of unmet needs showed for every five people who seek financial counselling, three people are assisted, and two people are turned away.
Australia has one of the highest ratios of household debt to income in the world, with data from the ABS showing that three in 10 households are overindebted. Doubling the number of financial counsellors can’t come soon enough and it will mean that an additional 125,000 people will receive assistance.
The financial counselling sector has long advocated for a levy on the financial services industry, in addition to government funding, so that financial counselling is adequately funded. This is the approach already in place in the United Kingdom.
The telecommunication and utilities sectors also contribute to financial stress, refer their customers to financial counsellors and benefit when they get back on track. It would be appropriate for industry levies to also apply to them.
Media contact: Fiona Guthrie, 0402 426 835