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Way Forward was invited to make a submission to the Australian Government’s inquiry into the nature and extent of poverty.
Our perspective is based on 6 years of supporting people out of financial hardship.
Over this time, we have observed the following trends in relation to people we support:
For the purpose of this submission, we have drawn upon a broad definition of poverty, which describes a lack of means to live and the experience of existing in a state of deprivation. For people experiencing poverty, their standard of living falls far below a minimum acceptable standard.
It is important to recognise that people who have income can still experience financial hardship. Financial hardship means that a person is unable to meet their expenses and debt repayments with their current income. If this continues for a long period of time, a person is at risk of falling into poverty. Therefore, prolonged financial hardship is a precursor to poverty.
Preventing people who are risk of falling from financial hardship into poverty, requires an approach that considers the unique and individual circumstances that people face in different areas of Australia.
These challenges include: a lack of employment and educational opportunities in some regional areas, low housing availability and the comparatively high cost of living in cities like Sydney. Overall, there is an affordability crisis across the county that is caused by a range of factors, which continues to drive people into hardship.
Way Forward’s submission to the inquiry into the extent and nature of poverty in Australia.
In mid- 2022, the Australian Government’s announced public consultation to improve the regulation of consumer credit in Australia.
The Government then published a consultation paper and called for feedback on future regulatory framework for buy now, pay later (BNPL) arrangements under the National Consumer Credit Protection Act 2009 (the Credit Act).
In December 2022, Way Forward made a submission calling for regulation of BNPL products.
From our experience working directly with people in financial hardship, we believe the BNPL industry promote products that are designed to appeal to people who have no other credit options and continue to push people further into a debt spiral.
Way Forward’s submission draws upon the research we conducted earlier this year, documented in the report ‘Balancing act: How financially vulnerable people are using BNPL to “dig their way out of debt’, which investigates the experience of our client’s – people experiencing financial hardship – with using BNPL.
From this research, we have found that the sources of harm our clients experience as a result of using BNPL can be categorised into the following:
Currently, BNPL is not regulated under the Credit Act because they fall under the exemptions available to certain types of credit in Schedule 1 to the Credit Act (the National Credit Code).
BNPL products are also not subject to responsible lending standards or other requirements of the Credit Act and BNPL providers do not need to hold an Australian Credit Licence (ACL).
As these products are unregulated, the potential for consumer harm is evident.
Way Forward has put together practical tips to help you get through Christmas and save some money in the process.
Having a debt free Christmas doesn’t mean being a grinch, it means looking after yourself and your family by spending money wisely.
Be strategic about gift buying
Gifts are a big part of Christmas for many of us. We want to show people how much we care by buying them presents. If this is important to you, there are ways to minimise costs.
Try a ‘Secret Santa’ where each person is allocated responsibility for purchasing one gift to one person, but the giver can be anonymous. Set a limit on how much gifts can cost.
Buying fewer, higher quality presents can provide the opportunity to exchange more meaningful and longer-lasting gifts that have a better chance of being useful.
Valuing time spent with friends and family
Valuing time we spend with the people who are important to us at Christmas time can take the pressure off spending money to show how much we care.
Checking out free events like Christmas carols or workshops that many local councils put on around this time of year can be valuable and save money. It also changes the emphasis from buying and spending to something that is an experience.
Set a budget and stick to it. And review it. And review it again.
Many clients who come to Way Forward have landed in financial trouble for this simple reason: they’ve spent more money than they earn, sometimes without realising. We suggest creating a budget.
It’s important to be honest with yourself about how much you’re truly spending. Setting a budget that accounts for what you’re spending, rather than what you hope you spend, will help you immensely.
One way you can guarantee you’ll stay within your budget is writing a simple list that details how much you want to spend overall, then list items you intend to buy and how much you want to allocate to each item within your total. This could be for gifts, food, transport and any other of your own expenses.
As you’re shopping, check that list you’ve got with you and make sure you leave anything behind that you didn’t intend to buy. Keep a list handy like on your device.
It can be empowering spending only what you planned and minimises buyer regret.
Planning is key
Are you hosting Christmas lunch and catering for 50 people? Panic buying food at the last minute is possibly the most expensive way to shop. Many supermarkets now have click and collect online ordering, which means your groceries will be ready for you when you want, and you can select exactly what you need and spend within a budget in a less stressful setting.
If you’re looking for fresh food, order your meat in advance and buying seasonal produce at the markets can save you a penny. Choosing fruit and vegetables that have had a bumper year rather than those that are in short supply can also help to save. Sometimes this can mean changing the ingredients in dishes you’re used to having at Christmas, like swapping out beans for peas.
Another idea is to shop your pantry or fridge – check what’s already in there, maybe you’ve got many of the ingredients you already need.
Use savings rather than relying on BNPL or Credit cards
There’s nothing worse than a Christmas debt hangover. Spending according to the funds you have available in your savings instead of borrowing to buy presents or essentials, is a great way to create positive money habits.
Avoid using Buy Now Pay Later (BNPL) to make purchases. Using BNPL is still ‘borrowing’ money that eventually needs to be paid off. And if you’re then using income to repay instalments on credit cards or BNPL to pay off gifts from Christmas, this means less money for holiday expenses. Even worse, if you then need to take on more credit to pay off credit, you could end up in financial hardship.
Aside from BNPL most of the short-term credit options have surprisingly big interest rates, which means you could end up spending the next few years paying off interest and repayments for a one-off event, being Christmas.
Spending according to your budget (and what you have saved up) means that you’ll feel better about the whole experience and start the new year with a clear head and fewer debts.
Post-Christmas budgeting tips
After recovering from the Christmas celebrations, a good way to kick start the year is by setting up an annual budget. Budgeting for the year has several benefits – it means you can factor in those big bills that come through less frequently like car registration or local government fees.
We have a free online budgeting tool on our website that can get you started.
What about school holidays?
If you’re supporting a family and your kids are still younger, there is a chance you’ll be feeling financial pressure to spend more money during the holiday season. Whether you’re going away on a holiday or finding holiday care arrangements for your kids, the costs can start to add up.
If you’re taking time off work to look after children during the school holidays, start with the free activities, events and public venues like galleries and museums. Many local councils have free events that they list on their website.
Getting out and about is also a great way to save money while doing something with your kids – bike riding, skateboarding, heading to the beach or park can cost little, and even cheaper if you bring your own lunch.
Starting back at school is another expense for families. Some ideas to get you started could be to recycle and reuse school supplies. See what is leftover from last year and work out what you’ve already got and then what you need.
Eva moved to Australia a few years ago from a country facing wide scale poverty.
Her life in Australia provided better economic opportunities. After being asked for financial support by family and friends back in her home country she felt an obligation to provide funds as she deeply understood the inescapable hardship they were facing.
However, Eva eventually ended up in hardship herself, unable to pay for her own essential needs because she was paying for others.
“I wanted to help my family because things were not good for them.”
“I was not too badly off at the beginning, but it escalated from there and I got into a deep mess.”
“It started with a personal loan, and then went into a credit card. My family eventually realised how bad my situation had become and asked that I stop borrowing money for them.
“As the situation got worse for me, I found it difficult to explain because they were overseas.”
Eva hadn’t created a budget before but had not encountered financial problems before she started taking out loans to send money to her friends and family overseas.
“I was not a good budget manager of any sort. When I had money, I knew how much I had to pay to creditors and was making minimum repayments. I was not missing payments.”
Eva was introduced to Way Forward via Christians Against Poverty (CAP).
“Christians Against Poverty gave me a good start. They then sent me to Way Forward who put together a repayment plan.
“Kelly helped me within two months. She had the solution, she was an amazing person. It changed my life.”
Eva is almost at the end of her repayment plan with Way Forward and she will have completed all her debt repayments by August 2023.
“My repayment arrangement was initially supposed to the be 3 years, but my circumstances changed and I had to give up one of my paying jobs, as it involved manual labour and I am older, so my arrangement is now 1 year.”
Eva reflects on what she has learned through the process of becoming a Way Forward client: “I’m rather careful now, I don’t overspend. I live with my sister, which keeps costs down. I’m in a good place.
“I’m still working, and I get a part pension also and I put aside as much as I can.”
For Eva, being upfront about her situation meant her financial problems could be dealt with.
“Don’t be afraid. Way Forward helped me and I know they can help you. Just tell them everything, and they see you through and help you all the way.
“Thank you very much for the wonderful work that Kelly and Way Forward did for me. I’m smiling more now.”
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Way Forward is pleased to announce that Brighte, a green energy lender for sustainable homes, has joined as our latest member.
By becoming a member, Brighte has shown a commitment to supporting its customers who need assistance with financial hardship.
Way Forward CEO David Berry said: “We would like to congratulate Brighte for becoming a member of Way Forward. This means that customers of Brighte who require hardship support, can access Way Forward’s service to help them get out of debt faster.”
Brighte Founder and CEO Katherine McConnell said: “Brighte has so far helped over 130,000 households nationwide get solar sooner, reduce their bills and experience all the benefits of clean energy.”
“While we have very low levels of hardship, we want to ensure that any customers who do face financial difficulties have all options available to them.”
“We are confident that Way Forward’s practical advice, extensive experience and human touch will be of great assistance for those who need it.”
David Berry, Way Forward CEO, added: “We hope to continue to build effective partnerships with a diverse range of lenders, to help us with our goal of putting clients first. Without our members, Way Forward would not exist.”
“Our efforts to work alongside our members to collaboratively support people in hardship to become debt free has been bolstered with the membership of Brighte.”
“Way Forward’s unique service offers support from our hardship advocates who negotiate with creditors on behalf of people who are struggling to pay multiple debts.”
“In current uncertain times, with the growing cost of living and resulting rent and mortgage stress, more people may need hardship support. Way Forward continues to work hard to negotiate repayment plans on behalf of those who need it, to ensure we are delivering a pathway to being debt free.”
When Kelly had to stop work to get treatment for breast cancer, her whole life was tipped upside down. The plan she had for her finances no longer worked and her debts slipped out of her control.
“The money problems were from credit cards and Harvey Norman credit line and family expenses. Having all those debts, and suddenly not being able to work, going down to one income and COVID. I was chasing my tail and not capable of organising anything at that point, because I had no money coming in.
Kelly said she was able to unpack her financial issues when she was undertaking treatment for cancer and found a contact who was an oncology social worker. This person gave her the time to take and provided direction for addressing her debt issues.
It is through this person that she was referred to Way Forward.
“Something I’ve learned from being so sick, is that you when people present you with options, you need to do something, act on it and take the help when it’s offered to you.”
“People are willing to help, and they want to help you.”
Kelly also found doing a budget with Way Forward most helpful.
“I put together a detailed budget with Bill. This is the first time I’ve done a proper, comprehensive budget, which is probably why I’ve lived well beyond my means.
“It made me realise where I was spending money that I hadn’t really thought about previously. It was good but also a bit confronting because you see where your money is going and how much you’re truly spending on things like interest repayments.”
Kelly describes being much more cautious with her spending.
“I will never have another credit card again. I do use Afterpay but it’s easier to pay that off.
“I definitely watch my spending and think much more about where it is going. I also make plans in a way I didn’t previously.”
Kelly describes having Way Forward provide an “objective point of view” provides accountability.
“Way Forward’s objectivity makes you face up to what you are actually doing. And then guides you to take control over your situation. It is invaluable.
Kelly describes learning about managing money, as a life skill that “everyone should learn”.
“Getting independent financial advice, before deciding, might give you some direction and at least provide the warnings if you’re unable to make repayments.”
“Learning financial life skills like budgets and saving should be taught at schools. It’s unfortunate that we’re sent into the world without any kind of course on managing money and budgeting because it’s so important to learn it.”
Emily knew she needed to leave her relationship, and that this was going to cost. She needed money to pay legal fees and something left over for her and her two children to live off.
After borrowing $15,000 to pay lawyers, she quickly spiralled, ending up with multitude of payday loans. She fell into a trap of borrowing to pay down the most pressing repayments.
“I was stuck in limbo and getting deeper into debt.”
“I would watch the amounts I needed to repay on those payday loans get bigger and bigger.”
At this point, Emily had tried a few different things to get on top of her debts.
She had spoken to a debt consolidation company, but after realising that the company would not guarantee an outcome and could advise she declare bankruptcy, even after she had paid their fees. Emily also did not want to be advised to declare bankruptcy.
“I didn’t want bankruptcy following me around and also meant I couldn’t pay off the debt and it’s important that I do that”.
“It was daunting to think of having a bad credit rating for 5 years, and that there is not really any way around it.”
“I also tried to pursue a debt consolidation loan with my bank, but they said no.”
Living instead of existing
Emily was referred to Way Forward from the National Debt Helpline.
“As soon as I contacted Way Forward, everything felt so easy.”
“Way Forward gives you the sense that they believe that you can do this, you can pay off your debts. They make you feel like they’re backing you.”
“They feel like they are advocated for you as a person, and that’s very heartening.”
“I spoke with Bill, who took the problem, and said, we’re going to look after this for you for a while.
“They offered me a solution and I felt good about that solution.”
“Everything has changed – where creditors were taking money out of my bank account, I can now save a little bit of money.”
Budgeting becomes easier
As a single parent on a fixed income, Emily has always used a budget.
“Recently, a medical bill came up and instead of asking to borrow money from family, I had $1000 in savings to put towards that.”
“I was able to buy birthday presents for the kids and do something special instead of buying something tokenistic.”
“I need to upgrade my car soon so I can potentially drive longer distances to a different job, and now I’m considering saving to buy that car rather than borrowing.”
Person-centred approach
Having recently started her repayments, Emily is relieved that the feeling of constant dread she had from not meeting her debt repayments is now gone.
“Way Forward seem to have a focus on trying to build people back up to regain their independence and self-worth to solving an unsolvable problem and resolve a crisis.”
“It’s so discreet, no one needs to know about this, it feels like it’s between me and Way Forward, and there’s a lot of respect attached to that”
She suggested that people who are struggling, would benefit from thinking beyond what they know about money and finances, because “when you’re in a debt trap, that’s all you know”.
“There often is a way out, we don’t know the right people to talk to.”
“My advice to anyone is is in trouble is to think beyond where you are now, unless you do something active, you won’t get out of it.”
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Three years into her repayment plan, Katrina can’t wait to pay off her debts and begin a new debt-free chapter
Migrating to Australia many years ago, Katrina recalls being faced with a bewildering number of things to learn and opportunities to explore. When she eventually landed a full-time job in private healthcare, she started earning a comfortable wage and a new, exciting phase began for Katrina, her four kids and partner.
As her husband was retired, Katrina was the sole bread winner and worked two jobs to financially support her family. At this time, many lucrative offers for all types of credit started popping up around her. She had a comfortable salary and the offers seemed too good to miss so she didn’t think twice.
“I never used credit cards or anything like that in my home country so I was pretty clueless financially, which eventually landed me in a total mess.”
“At the time, my wages had to cover living expenses for a family of six and on top of this, I also sent money to my parents to take care of them. When my late father became terribly ill, I flew the whole family back home to see him.”
“I also paid for my family’s holiday in the US where I put way too many things on my credit cards. After my husband passed away, I’m glad I still have those family memories and I don’t regret that decision but years later, I see how managing my finances had gone totally overboard.”
Soon the interest rates of Katrina’s loans and credit cards became so enormous, she had no money left to feed her family. She requested a 3-month hardship arrangement from the banks but when that period was over, the same loans and interest rates awaited her.
Katrina was working around the clock to end her debt cycle but when no viable solution seemed to exist, she fell into deep depression.
“It was too difficult to tell my extended family about my debt and ask to borrow money so I kind of just swallowed it all.”
“Sundays used to be my day off from work that we’d spend together as a family doing fun outings. But I didn’t want to get up anymore. I remember just lying on my bed feeling depressed and exhausted. It was the worst feeling.”
When negotiating her debts with her banks, a customer service agent at Westpac advised Katrina to contact Way Forward for help.
“I felt I had tried everything and nothing had worked so Way Forward seemed too good to be true. I felt there had to be a catch to what they were proposing.”
“When I was offered these reductions on my interest rates and option to simplify all my payments into one direct debit to Way Forward, I couldn’t believe it. I had a way out!”
“When my plan was approved, it felt like this heavy thing was lifted off my shoulders and I could move a little bit more freely.”
Today, Katrina has two years left of her five-year debt repayment plan and excitedly awaits to become a debt-free woman.
Katrina has been so happy with the free service that she’s told many people about Way Forward and even referred a friend who is over a year into her payment plan. The friend also referred someone else to Way Forward.
“I am inspired to work more to pay off this debt, to finish it. What has helped me is being able to take my family out again because I know my budget and how much spare money I have left at the end of the month. I feel more in control of my finances now.”
“In the next few years, I’ll be able to finish. Imagine if I could save as much as I’m putting into my debt repayments! I could do something else like save for a big project once I’ve paid off all my debts. That thought keeps me energised.”
For anyone in financial trouble today, Katrina has this advice, “Don’t think twice about contacting Way Forward.”
“In three years, I went from depression and feeling like there was no way out of my debts to feeling so inspired and making financial plans for the future. I am living proof it works! I can’t thank Way Forward enough for turning things around for me and my family.”
Step 1: We evaluate your circumstance and financial situation.
Step 2: We take over negotiations with creditors and act your behalf.
Step 3: We put together a manageable repayment plan and budget. You make one reoccurring payment to us that we then distribute to all creditors, 100% of which goes towards reducing the debt.
If you’re stuck, get help. Pick up the phone and ask for support. Find out if we can help you.
Use our free budget planner or debt repayment calculator.
There is no reason to struggle alone as help is out there.
Struggling to pay for the essentials such as food and rent and want to know more about your options? Our emergency funding page lists some of the available free emergency services and funding if you live in Australia and find yourself in financial difficulty.
How credit cards, BNPL and rising living costs landed Scott’s family in debt
Scott is the sole breadwinner in his family of two kids, one with a disability, and a wife who is studying. The pandemic and a move to the city landed them in financial trouble as Scott could no longer afford his family’s living expenses.
“We moved into the city about 18 months ago from a regional location so our daughter could attend University. There was an immediate increase in living costs, everyday costs alongside a large cost in moving our family,” Scott recalls.
“Even though I budgeted for increased living expenses and rent, and just a little bit extra, it mounted up so quickly that I didn’t have enough income to pay everyday expenses.”
“At the same time, our son reached the age where government support for him ended so we not only lost income that we used every week to pay groceries and rent, but on top of that, there was an increase in expenses.”
The situation deteriorated as Scott took on a range of credit cards and loans to make ends meet, “I started off with small personal loans and when that amount was exhausted, I got one credit card and then another credit card to pay off that credit card and so forth.”
“What accelerated the personal and psychological pressure was signing up for Buy Now Pay Later (BNPL) schemes. It seemed a very good idea at that time, we could pay for groceries or put everyday expenses on gift cards, and then pay them off in regular payments fortnightly or monthly over a short period of time.”
“But once there was a number BNPL payments running on top of all other expenses, there was no way I could keep up. It all snowballed quickly to a stage where I had no idea how I was going to make the payments just on the credit cards and still pay school fees and other family expenses.”
“The hardest part was having no idea what to do next or where to go to for assistance. I felt helpless, constantly catastrophising the situation, uncertain what was going to happen next and fearing our family would end up on the street.”
Scott’s financial situation caused him depression resulting in him being admitted to hospital. At the time, he spoke with social workers who recommended several debt consolidation companies with large fees attached, which Scott could not afford so he searched for alternatives.
“I discovered Way Forward when I googled free services to help me get out of debt. When I found the organisation, I was hopeful there was a way out of my situation but I was still nervous that I’ve got in such trouble so quickly that nobody’s going to be able to help. But I thought it can’t hurt to make a phone call.”
Scott got in touch with Way Forward to find a solution to his +$40,000 of debts. Since then, the team renegotiated with his creditors to get him on a manageable repayment plan.
“From the start, my Hardship Advocate seemed very experienced and knew what she’s talking about. Her primary concern was my wellbeing and how was I doing throughout the whole process, right up until the repayment plan was put into place. With every contact, I felt her focus was to relieve the financial pressure I was under and build a way forward and plan out of debt. It was just amazing.”
When the repayment plan was accepted by Scott’s creditors, Scott and his family celebrated. He is now receiving medical care and excitedly awaits for this new chapter in his family’s life without money worries weighing heavy on their minds.
“Now that I’m repaying my debts in an affordable way, my outlook has dramatically changed. Although this plan will last for several years, it’s completely affordable so it doesn’t further impact my family.”
“As long as I stick to my budget and repayment plan, there’ll be money for school fees next year and I won’t have to sit and think where to get this money from. Now I don’t have a dread of the future financially, which is a welcome change.”
For others experiencing debt stress, Scott has this advice, “If you’re struggling with debt, don’t hesitate to contact Way Forward. I didn’t ask for help early enough as I was stubborn and felt there must be a way to fix it all on my own. But had I contacted Way Forward earlier, weeks before I did, I’m confident I would not have ended up in hospital.”
Way Forward supports 800+ Australians experiencing financial hardship and currently manages debt tied to 2,600+ credit cards on behalf of our clients, amounting to $20M. The average debt for each individual credit card is $9,900*.
Our Hardship Advocates have recently seen a rise in Australians taking on credit cards and BNPL loans to afford everyday items like food, petrol and nappies – landing them in debt they cannot manage and with Way Forward.
If you or someone you know is struggling to make ends meet, ask for help early and avoid taking more credit as it can land you in further hardship.
Contact our team on 1300 045 502 or on our website to see if we can help. Also see our page on emergency services and funding options.
*) Source: Way Forward, March & April 2022
Way Forward Debt Solutions is a registered charity in Australia – ABN 20 628 702 821
