Payday lenders contributing to Victoria’s mental health crisis

A new report based on a Victorian financial counselling services de-identified client data reveals that mental illness and psychiatric disorders were the most commonly co-occurring factors in relation to financial hardship.

The report released by Better Place Australia drew data from 1983 people who accessed their financial counselling services between July 2017 and June 2018. The data showed that 25% of clients disclosed they had a disability and over 55% of this group stated they had a psychiatric disorder.

Further anecdotal evidence from Better Place Australia financial counsellors indicates that over 70% of people accessing financial counselling had a mental illness such as depression or anxiety and between 10% to 30% of all clients had expressed some form of suicidal ideation. Mental health services were the second most commonly referred service. Backing this up the February 2019 Senate Economics References Committee inquiry into credit and hardship received a number of submissions referring to people with mental health issues and predatory lending practices.

Better Place Australia financial counsellors state that the use of payday lenders amongst their clients can be as high as 60%.

Serge Sardo, the CEO of Better Place Australia says, “Many people who access payday lenders experience some form of mental illness or impairment leaving them in an extremely vulnerable situation that impacts on their decision making. Payday lenders pay little regard to people’s vulnerability when providing loans with their extremely high interest rates.”

The report also shows that whilst banks and utilities have become more willing to negotiate suitable payment plans for clients, payday lenders, telcos and debt collectors were often uncooperative in negotiating reasonable payment plans.

“My debts are crippling me, there is no way to address this problem. I am too mentally ill to work, but not mentally ill enough to receive a pension. NewStart only barely covers my rent. This leaves me $80 per fortnight for EVERYTHING else” client quote.

Serge Sardo says “The business model of payday lenders relies on vulnerable people borrowing money at high interest rates. The current regulation of such businesses and their lending practices is clearly inadequate and requires an overhaul”

This report and Better Place’s submission to the Productivity Commission’s of Inquiry into Mental Health both suggest that at a systemic level, mental health services and debt crisis response services are not purposefully integrated and there is often a disconnect between Federally, State and Locally funded programs. This new report also recommends that financial counselling services should be embedded within organisations that have multi-disciplinary teams and can offer a range of complementary support services.


End Release

Serge Sardo is available for interview on 0439 578 277 He is also available to travel to Melbourne studios. Media contact – Graeme Westaway 0438 318 311

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