Advising clients about debt

• While the primary causes of homelessness are complex and intersecting, a lack of financial resources is a core determinate that explains whether significant life events result in an experience of homelessness. Put simply, poverty leads to homelessness.
• Unable to afford basic, everyday life essentials, people living in financial stress and poverty experience persistent pressures that impact their housing, health, inter-personal relationships, and the ability to achieve positive long-term goals.
• For low-income renters, any increase in living expenses or debt repayments can lead to eviction and ultimately, homelessness.

• Already living below the poverty line and excluded from traditional forms of credit, low-income households disproportionately use precarious credit products. Many high-cost credit products are targeted at marginalised members of the community already in financial hardship. To meet their obligations under these agreements, many consumers of these products go without life essentials such as food, medicine, and clothing.
• Unaware of their rights or options, Queenslanders in financial hardship prioritise debt repayments over rent or utility bills, placing their housing at risk.
• The law imposes several obligations on companies that provide these products and services. It also provides protections to people in significant debt that have limited assets and income.

• Homelessness Law’s Consumer Advocacy Project provides impactful, tailored representation to prevent and end homelessness by resolving consumer money and debt issues that push marginalised Queenslanders into homelessness.
• Homelessness Law’s experienced staff and pro bono lawyers work collaboratively to address financial products targeted at people in financial hardship, including payday loans, consumer leases, buy now pay later, and high-cost car loans.
• By resolving the money and debt matters compounding a person’s financial hardship, we can stop the debt spiral and keep people safely housed. Unburdened by financial and housing stress, our clients can focus on activities that improve their well-being, autonomy, and productivity.

This step is necessary for understanding the type of debt, whether it is judgment proof or statute barred, whether the client has capacity to put forward a debt repayment plan and any specific solution the client is seeking.

• Identify the debt on which assistance is required
• What other debts are in play for the client?
• What is the current state of collection/enforcement?
• What were the circumstances leading up to the creation of the debt?
• Do we need to gather further information about the debt?
• What are the client’s current financial circumstances?
• Does the client have any particular objectives or solutions in mind?

Understanding the type of debt is important as this will be relevant to the options that exist and avenues to challenge it.

The debt will generally fall within one of the below categories:

• Regulated credit e.g. car loans, personal loans including small amount credit contracts and medium amount credit contracts, credit cards, consumer leases, overdrafts and line of credit accounts and ‘buy now, pay later’ arrangements
• Unregulated credit e.g. business or investment loans
• Overdue rent
• Utilities or telecommunications debt
• Fines and/or government debts including SPER, Centrelink or taxation

Consider the purpose for which the loan was incurred:

• Was the debt characterised corrected i.e. was the debt to be provided wholly or predominately for personal, domestic or household purposes, or residential property investment?
• Should the credit have been regulated?

Generally, creditors have six years from the date the cause of action arose to commence a proceeding – i.e. from when the debt was first incurred, was acknowledged in writing, or a payment was made. To avoid restarting the limitation period, clients should not make a payment on old debts without more detailed legal advice.

The options available to the client will largely depend on the type of debt involved and the client’s priorities, but could include:

• Turn off direct debit arrangements
• Seek waiver
• Hardship variation
• Place on hold
• Consolidate debt
• Payment plan
• Challenge the debt
• Bankruptcy

Remember to inform the client of external dispute resolution pathways as applicable including the Australian Financial Complaints Authority (AFCA) and the Telecommunications Industry Ombudsman.

If a legal representative is involved (e.g. LawRight), a request can be made to the lender to direct any communications to that representative to take pressure off the client.

You may give a preliminary view on which options may be appropriate for the client based on their instructions.

Advise the client that they should apply for a free credit report from credit reporting agencies (Equifax, Illion and Experian) to ensure that they are aware of all potential debts.  It can be beneficial to apply for a report from all three agencies as different services report different debts.  Applications can be made online after which the credit report will be emailed to them.  The client can make the request themselves, or the legal service assistance them (e.g. LawRight) may assist if they are unable to take this step themselves.

Complete the following client authorities and have the client sign relevant client authorities (e.g. authorities for each lender, credit reporting agency, support worker and any other relevant progressional such as a health professional who could provide supporting evidence of the client’s circumstances).