The help-seeking behaviours of individuals in financial hardship

  • Gregory Mowle

    Student thesis: Master's Thesis


    Many consumers experience episodes of financial hardship where they are unable to pay their personal debts such as credit cards, personal loans, car loans or mortgages. Although Australia has laws and codes to protect consumers if they are unable to maintain their debt repayments, as well as a range of resources and services to assist consumers in how to approach their creditors for assistance, there has been little Australian research into what are the help-seeking behaviours of individuals in financial hardship. An understanding of what an individual does once they are aware they are unable to repay their debts or start to face debt collection pressures such as phone calls or communications from their creditors may help not only individuals in financial hardship but also creditors, regulators, consumer advocates and the designers of financial literacy resources. This thesis focusses on the following research questions – •What are the determinants of financial hardship for individuals in Australia? •What services and options do individuals that are in financial hardship in Australia access and why? •What are the help-seeking behaviours of individuals that are in financial hardship in Australia? •What effect do financial literacy initiatives and resources have on individuals that are in financial hardship in Australia?
    This research explored the help-seeking behaviour of individuals in financial hardship by interviewing two groups. The first was individuals who had declared themselves bankrupt in the 6-12 months prior to their interview. This group was asked questions relating to how they arrived at their state of financial hardship, what they did once they realised they were unable to repay their debts, what options they investigated and undertook, what services they sought help from (if any), if they had heard of services provided by charities such as financial counselling, who they received advice from as well as what they thought about the process to declare themselves bankrupt. The second group was individuals who had walked into a small-amount, short-term, high-cost “payday lender” and were asked about their financial situation, what was the purpose of the loan they were applying for, how they felt about walking into a payday lending shopfront, and if they had approached “mainstream lenders”. They were also asked what they did if they were unable to repay their debts, what options did they undertake to improve their financial situation, what services did they seek financial help from (if any), if they had heard of services provided by charities such as a No Interest Loan, who did they receive advice from as well as what they thought about the process of applying for a Payday Loan.
    The study found that individuals are reluctant to seek help from not-for-profit organisations such as financial counsellors. Their initial help was from an unqualified source such as family or friends. They tended to type phrases such as “help with debts” into an internet search engine and contact the first few organisations that appeared with no reservations that the service was a for-profit organisation and may have a conflict of interest. Despite the large investment from the Australian government into financial literacy resources and programs, consumers were reluctant to use these resources or because of the stress their financial hardship was creating, could not recall where to locate these services. The clients of the Payday lender were mostly unaware of free services delivered by charities such as No Interest Loans or financial counselling or did not want to be seen as a “charity case”. Both groups experienced a range of difficulties including unexpected deaths, divorce, unemployment and addictions that propelled them into financial hardship. However, their levels of financial literacy were similar to those of other Australians. There were significant implications of financial hardship for their physical and mental health. The recommendations from this study are that first, financial literacy programs need to be scaled back and replaced with additional support for financial hardship assistance. Second, recognition that financial hardship is the result of many complex factors and is often not the result of low financial literacy, greed and/or fraud. Third, the process for lodging a bankruptcy debtor’s petition in Australia needs to be changed so that debtors can no longer go bankrupt without receiving impartial advice and assistance. Fourth, financial counselling programs in Australia should be re-branded away from charities and/or faith-based organisations to remove the stigma of going to a charity for assistance. Financial counsellors need to be more mainstream and available to everyone who needs help in managing their finances.
    Further research is recommended to interview a larger sample of bankrupts as the results for the small sample size for this study may not generalise to the population of bankrupts. However, the difficulties in researching this stressful and painful experience must be recognised and it is likely to continue to be hard to find a large group willing to talk about their experiences. This study pre-dates the COVID pandemic and a post-COVID update in light of rapid changes to insolvency regulations, further research on younger bankrupts, as well as a study of the views of financial counsellors on the Australian bankruptcy process would all contribute to our understanding of the experiences of people coping with financial hardship.
    Date of Award2021
    Original languageEnglish
    SupervisorTesfaye Gebremedhin (Supervisor) & Anne Daly (Supervisor)

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