Vultures of debt prey on vulnerable

DEBT agreements have become the new scourge of our economy and society. They unfairly prey on cash-strapped households and debt-laden families.

Hmmm, I wonder if any are owned by the banks?

These vultures of the debt industry are making lots of money for themselves and extending the suffering of their victims, oops, I mean customers.

In most cases, private debt agreements make the road back to financial balance harder and longer, especially compared with commonsense budgeting and free financial counselling available to everyone through the state and federal governments’ Financial Counselling Australia.

The main aim of debt-agreement companies is to make a profit. And the source of these profits are the very people they are supposed to be “helping”. Yes, the vulnerable, debt-laden, financially illiterate and stressed-out households they are signing up by the thousands.

There is one success story in this surge of people signing up to debt agreements. The companies are making a motser.

They seem to be springing up all over the place and spending hundreds of thousands of dollars on advertising.

According to government statistics, debt agreements are at their highest level with almost 13,600 people signing themselves over to these companies last year.

Sure, I understand how stressful it must be to have debt collectors chasing you.

And I also understand how alluring these ads and forceful their salespeople can be to get people to sign up. These salespeople can also earn commissions or bonuses for each signature.

A debt agreement is still an act of bankruptcy – it is not just a little side-arrangement to pay part of the debt and forgive the balance.

These agreements are registered by the government and are recorded on credit records.

They are not a cost-free way to consolidate debts.

If all the payments arranged by the debt agreement company are not made, then the creditors can still demand their full amount owed plus interest!

Meanwhile, the debt agreement company has taken its profit and commission and is off signing up another sucker.

I know what some of you might be thinking. A debt is a debt. These debt-laden households shouldn’t have got into this position in the first place. Right?

Okay, then let’s look at how they have got into this position. Excessive use of credit is the biggest reason for personal insolvencies.

According to Australian Financial Security Authority statistics, the use and availability of credit has for the first time overtaken unemployment and loss of income as the biggest reason people get into financial hardship.

And as the growth in credit has continued, so has the growth in debt-agreement companies.

Hmm. Sort of brings us right back to the beginning of the debt cycle – the banks and lenders. Another reason we need a royal commission into the banking industry.