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					RMIT Submission to Consumer Credit Review

Consumer Credit Review
Submission from RMIT University By Supriya Singh, Warren McKeown, Paul Myers and Marita Shelly

12 August 2005

Preface This submission r is part of a larger research project sponsored by TPA Consumer Trust into “Families at Risk Deciding on Personal Debt”. There is a growing amount of literature on debt in Australia and this project considers the current literature and, in particular, evidence of debt provided by published data, financial counsellors and other sources The project has been developed on the following lines: (a) (b) (c) (d) (e) (f) Formation of broad consultative group; Literature review of credit and credit regulation; In depth interviews with individuals who have debt problems; Interviews with Financial counsellors; Presentation of papers at conferences; and Final report to TPA Consumer Trust.

In our submission to review we have relied on: (a) the stories and evidence provided by our interviews with persons who have had trouble with credit; (b) interviews with Victorian Financial Counsellors from regional and north-west metropolitan area; and (c) our comments from our research. The initial reports to the TPA Consumer Trust are being finalised. A copy of the titles and tables of contents of the draft reports are attached in Appendix One and Two. Once we have submitted our findings in October these reports can be included in your review. Appendix three is a copy of a paper presented at the Association of Financial Services Educators Annual Conference in July 2005 titled: Low income youth and debt: a case study.’

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RMIT Submission to Consumer Credit Review Terms or reference 1 Examine the efficiency and fairness of the operation of credit markets in Victoria, including but not limited to: 1(a) the nature and extent of microfinance in Victoria, including options for/barriers to the provision of microfinance Issue 1 What are the current experiences of microfinance in Victoria?

Interview Analysis: Only one of the eight interviewees had used a No Interest Loan. Her experience was positive as it also allowed her to show that she could repay credit, which enabled her access to other loans.

Another spent all the advance from Centreline immediately without thinking about the reduced payments in the future. This caused budget problems. Borrowing from families and friends is a common method of overcoming short-term financial difficulties, including losing the entire pension at the pokies!

It was revealed that to overcome shortfalls in income or to finance unexpected expenses, generally mainstream credit cards were accessed, and credit providers were accepted on the basis of accessibility and not interest rate charges. None of the interviewees used alternative providers such as payday lenders or pawnbrokers.

Financial Advisors Comments:

A common observation offered by financial counsellors interviewed said that the $500 cash advance per annum provided by Centrelink to those over 16 years is too accessible. As soon as the young person is eligible to apply they approach Centrelink for the advance. According to the interviewees, Centrelink staff does not and are not obliged to undertake any investigation as to purpose or ability to repay the loan, it is given as a matter of course. The cash advance is provided on application to the recipient‟s bank account and, although no interest is charged on the advance, Centrelink reclaims repayments at a rate of $38.50 per pay period. There is no risk to provider of the credit facility as the repayments are guaranteed by the deduction of $38.50 per fortnight from the allowance.

A major problem reported by all interviewees is that there is universal „blowing‟ of the advance on latest mobile phone or other „luxury‟ good as soon as the young person becomes eligible. Comments about the role of consumer culture and the need of young people to “be with it” are demonstrated by the observation of the common pattern of spending with the $500 cash advance.

The consequence of such action is that less money is available from the young person‟s allowance for the next 13 pay periods to meet other expenses. For example, if rent takes 30 per 2

RMIT Submission to Consumer Credit Review cent to 40 per cent of an allowance as estimated by NWRN (2005) before the repayment is deducted, then this increased the percentage of the allowance required for rent and then creates other pressure on living expenses. In addition, if a young person has committed a Centrelink breach or received an overpayment then the clawback can reduce further the net amount of the allowance to a maximum reduction of 25 per cent. As the allowance is determined to cover basic needs then any reduction would see the young person suffer a reduction in their standard of living.

Another problem observed by financial counsellors is the matter of bank fees. To be paid a Centrelink allowance, a client must provide bank account details so that payments can be made directly to the person‟s account. Many young people have little choice but to use a direct debit facility for purposes of paying utility accounts, rent or other such payments as they often do not accumulate enough funds to pay the accounts in larger amounts. If the balance in the account is low and the regular payments are reduced as a result of the repayment of an advance it is frequently observed that it is even more difficult for a young person to meet their normal living expenses when a bank fee for “insufficient funds” is incurred. Issue 2 What are the options for the provision of microfinance in Victoria? Our Comments: Continual partnership between community organizations and mainstream providers can assist low-income earners to access mainstream financial services. Providing relevant and affordable mainstream financial services, similar to the Step Up loan program currently run by the National Australia Bank in conjunction with Good Shepherd which closes the gap between no interest loans and main stream credit, will assists with social inclusion and economic development (taken from the lit. review in Australia). Issue 3 What are the barriers to the provision of microfinance in Victoria? Interview Analysis: People in difficulty not seeking assistance from community organization. A lack of knowledge/information about assistance and programs available through community organizations. Some of the interviewees used credit cards to purchase essential household items and it took several years to pay of the item.

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RMIT Submission to Consumer Credit Review

Issue 4 What could Government do to facilitate the provision of microfinance? Our Comments: A government policy with financial assistance to banks to support use of Community Development Finance Institutions. (CDFI) The CDFIs can provide:     Small loans to provide alternatives to payday lending; More financial counseling services and financial literacy education; Low-fee transaction accounts; and Low-cost, interest-bearing savings accounts or savings incentive programs.

1(b) irresponsible and unethical advertising and lending practices Issue 5 What evidence is there of irresponsible or unethical lending? Interview Analysis: Evidence of irresponsible lending occurs in nearly every case. Credit cards are the main source of this lending. Banks will increase the credit limit on credit cards without adequately checking the ability of the cardholder to repay the debt. In one instance a woman started with $3000 as a limit while she was receiving government support. The bank continued offering to increase her credit limit up to a $25,000 limit, which she used but could not repay. This practice of increasing the credit card limits to people who are not in control of their finances caused bankruptcy and family distress. Issue 6 Are advertising practices in line with community standards? Should credit advertisements carry a ‘health’ warning? Our Comments: The provision of credit is a more complex issue than a health warning. While credit contracts have become more sophisticated it appears that many consumers are not “credit-savvy” to these innovations. People do not seriously investigate credit options except for home loans. The people who have got into trouble with credit have taken the first available or convenient contract. Credit is embedded in a range of contracts, e.g., mobile phones, Internet access, no-interest purchases from stores and customers look at the product only.

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RMIT Submission to Consumer Credit Review Issue 7 What is the evidence of the impact of advertising on demand for credit? Interview Analysis: The influence of advertising of whether credit was taken was not discussed, yet there were instances where letters of offers from credit providers to increase credit limits were accepted without consideration of whether the person could repay the amount or of interest rates. In one instance, a man not realising the interest rates charged was so high, just signed for $5,000 and $3,000 and then taking a cash advancement thinking it was a convenient option. Issue 8 Should credit providers be legally compelled to make a satisfactory assessment of capacity to repay? If so, what should this entail? Our Comments: Yes. As mentioned in response to Issue 5 it is clear that the increase in the limit of credit cards is a serious issue. An analysis with financial planning is appropriate: A financial planner cannot recommend a financial plan until a full assessment of the client. This is commonly known as Knowing your client and a shorten version of this process could be undertaken. Also individuals could complete a self-administrated survey/test to assist with deciding whether to the credit is appropriate for their financial situation.

Comments from Financial Counsellors: A common comment was that a young person often fails to think of consequences of decisionmaking. The example given is the effect of a young person who buys a car with borrowed money. Insurance may or may not be taken out but even if it is and it eventuates that the car has been modified from the manufacturer‟s specifications and an accident occurs then it is possible for insurance company to avoid the contract with the young person for misrepresentation. The young person may then have to borrow more to pay off the damage. “He buys a car. It is not insured and he has an accident. The car is a write off. The damage comes to $20,000 and with paying for other car repairs he is in real strife. He‟s still at school also. Even now he doesn‟t realise how much a setback this is in his life.” Examples were also given of credit card problems: “these problems hit the 18 – 24 year olds pretty hard and the estimated average debt is over $5,000.” “It is simply too easy to get a credit card – the advertising by banks is too slick – it encourages the young people to spend now and pay later.” Issue 9 Is there a need to further assist consumer decision-making? If so, how is this best done? Our Comments: Yes. The Financial Literacy Task Force is offering a systematic and integrated approach that aims to improve financial literacy. Financial Literacy should be a government policy rather than an optional activity provided by socially responsible lending institutions,

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RMIT Submission to Consumer Credit Review Issue 10 Do all groups in the community have ready access to credit? Interview Analysis: Each interviewee had access to one form or another of credit but the issue was that generally the type of credit was not appropriate for their situation. Issue 11 Is credit regulation appropriate for all groups in the community? & Issue 12 What other emerging marketplace practices or credit products need attention? No Comments 1(d) the increasing role played by intermediaries. Issue 13 If credit is facilitated by traders who are separately regulated – such as estate agents – should there be a requirement for the estate agent to inform the consumer if a referral is made to a related entity? Do the linked credit provider provisions of the Code provide sufficient regulation? Our Comments As stated in Issue 5 we believe that credit providers should comply with similar requirements as financial planners before the client can make and credit/investing decision. In all commercial fields a client is entitled to be informed about the independence of their advisor. Credit providers and intermediaries should be obliged to disclose all commissions received and their fee structure.

Terms of reference 3 Having regard to existing research, commission research into: 3(a) the credit market in Victoria, with particular reference to fringe lending and any special features in rural and regional Victoria 3(b) the effect on consumers, industry and regulators of introducing ‘positive’ credit reporting . Our Comments RMIT would be interested in further research into this area.

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RMIT Submission to Consumer Credit Review

Appendix One

Literature Review on Personal Credit and Debt in Australia

Families at Risk Deciding on Personal Debt
By Supriya Singh, Paul Myers, Warren McKeown and Marita Shelly

23 May 2005

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RMIT Submission to Consumer Credit Review Table of Contents List of Figures .................................................................................................. 10 List of Tables…………………………………………………………………..6 1. Overview ......................................................... Error! Bookmark not defined. 1.1 Extent of literature on personal debt and credit in AustraliaError! not defined. 1.2 Dimensions of personal debt and credit in AustraliaError! defined. 1.3 1.4 1.5 1.6 2. 2.1 2.2 Bookmark not

Bookmark

Credit to the poor ............................. Error! Bookmark not defined. Regulation of credit ......................... Error! Bookmark not defined. Financial literacy ............................. Error! Bookmark not defined. Measures to address issues of household debtError! Bookmark not defined. Household debt and credit ............... Error! Bookmark not defined. Increase in household credit ............ Error! Bookmark not defined.

Dimensions of personal debt and credit in AustraliaError! Bookmark not defined.

2.3 Personal credit is a small but growing portion of household creditError! Bookmark not defined. 2.4 Level of household debt is lower over the last decadeError! Bookmark not defined. 3. Credit to the poor ............................................. Error! Bookmark not defined. 3.1 Access to credit and financial exclusionError! Bookmark not defined. 3.2 Community organisations working with mainstream providersError! Bookmark not defined. 3.3 3.4 3.5 3.6 Interest free loans............................. Error! Bookmark not defined. Microfinance .................................... Error! Bookmark not defined. Payday lending ................................ Error! Bookmark not defined. Book Up ........................................... Error! Bookmark not defined.

3.7 Lack of community development finance institutions (CDFI) . Error! Bookmark not defined. 4. Regulation of credit ............................................. Error! Bookmark not defined. 4.1 Truth in lending ............................... Error! Bookmark not defined. Bookmark not 4.2 Reviews of the Uniform Consumer Credit CodeError! defined. 4.3 5.1 5.2 5.3

Regulation of financial reporting ..... Error! Bookmark not defined. The ANZ study ................................ Error! Bookmark not defined. Australian consumers and money .... Error! Bookmark not defined. Consumer bodies react..................... Error! Bookmark not defined. 8

5. Financial literacy ................................................. Error! Bookmark not defined.

RMIT Submission to Consumer Credit Review 5.4 5.4.1 5.5 5.6 6. A Cultural Consumer Behaviour ModelError! Bookmark not defined. Cross cultural issues ........................ Error! Bookmark not defined. Consumer education and financial literacyError! Bookmark not defined. Curbing exploitative practices by industryError! Bookmark not defined.

Conclusion: Measures to address household debtError! Bookmark not defined. Acknowledgments ........................................... Error! Bookmark not defined. References ....................................................... Error! Bookmark not defined.

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RMIT Submission to Consumer Credit Review List of Figures 1. Measures of Financial Stress 2. Housing Debt and Financial Stress by Income 3. Centrelink Income Support and the Henderson Poverty Line 4. The Consumer Behaviour Model 5. A Cultural Consumer Behaviour Model

11 14 15 28 33 12 12

List of

Tables
1. 2. Household Debt Personal Credit amongst the Poorest Households in Australia

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RMIT Submission to Consumer Credit Review

Appendix Two

Literature Review on Personal Credit and Debt

Families at Risk Deciding on Personal Debt
By Supriya Singh, Warren McKeown, Paul Myers and Marita Shelly

20 May 2005

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RMIT Submission to Consumer Credit Review Table of Contents

1. 2. 3.

Overview ......................................................... Error! Bookmark not defined. Introduction ..................................................... Error! Bookmark not defined. Perceptions of Money and Credit .................... Error! Bookmark not defined. 3.1 3.2 3.3 Money and Markets ................................. Error! Bookmark not defined. Money is Socially Shaped ....................... Error! Bookmark not defined. 3.2.1 Money is Personal ....................... Error! Bookmark not defined. Cultural Differences Around Money ...... Error! Bookmark not defined. Sense-making .......................................... Error! Bookmark not defined. Rationality and Decision-Making ............ Error! Bookmark not defined. Bookmark not

4. 5.

Information Provision ...................................... Error! Bookmark not defined. 4.1 5.1 Decision-Making ............................................. Error! Bookmark not defined. 5.2 Psychological and Social Influences on Decision-MakingError! defined. 5. 2.1 5.3 5.3

Risk Tolerance and Decision-MakingError! Bookmark not defined.

Decision Making and Channels of InformationError! Bookmark not defined. Decision Making in Different User GroupsError! Bookmark not defined. 5.3.1 Low Income Groups and Consumer CreditError! Bookmark not defined. 5.3.1 Gender and the Management of MoneyError! Bookmark not defined. Bookmark not

6.

Case Studies of Financial Decision Making .... Error! Bookmark not defined. 6.1 Choosing Fund Managers: The Role of Individual ChoiceError! defined. 6.2

Individual Shareholders‟ Decision MakingError! Bookmark not defined.

7.

Conclusion ....................................................... Error! Bookmark not defined. Acknowledgments ........................................... Error! Bookmark not defined.

References ............................................................... Error! Bookmark not defined.

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RMIT Submission to Consumer Credit Review

Appendix Three

Low income youth and debt: a case study
Abstract:
This paper is part of a larger research project sponsored by TPA Consumer Trust into “Families at Risk Deciding on Personal Debt”. Low income youth, particularly those in the most vulnerable socio economic groups, is a significant area of concern as it appears that young people are not adequately prepared to cope with modern-day debt -debt such as mobile phone accounts, credit cards, store cards, loans and insurance contracts. There is a growing amount of literature on debt in Australia and this paper considers the current literature and, in particular, evidence of debt provided by published data, financial counsellors and other sources. Anecdotal evidence indicates that the level of debt of young people is a serious problem. Such evidence raises associated questions about the level of knowledge or education imparted to young people before they enter into a credit arrangement. This paper includes observations of the information available to people and the education process in light of the Federal Government‟s Consumer and Financial Literacy Taskforce‟s report on financial literacy levels in the community. This paper will also discuss evidence gained from a youth and family services centre in regional Victoria about the level of understanding of the consequences of mismanagement of a credit facility by young people and suggest that a greater appreciation be taken of the role of family and culture in the forming of money management skills and attitudes. Supriya Singh, Paul Myers, Warren McKeown and Marita Shelly RMIT University July 2005 Overview of project This paper reflects some of a larger study on the topic of “Families at Risk Deciding on Personal Debt” which is funded by TPA Consumer Trust, a trust supporting research into consumer protection in Victoria. The paper outlines some of the recent literature, evidence of debt provided in published data and interviews conducted with financial counsellors on the issue of low income families and debt. Particular focus is placed on matters which impact on low income youth, especially those in the most vulnerable socio economic groups. The paper considers the impact of consumer culture on young people and the recent research undertaken by banks and the Australian Securities and Investments Commission on the level of concern over community financial literacy standards. The literature indicates that the level of debt carried by young people is of significant concern because there is evidence that young people are not adequately prepared to cope with modernday debt. Young people experience debt such as mobile phone accounts, credit cards, store cards, loans and the consequence of voidable insurance contracts. Anecdotal evidence indicates that the level of debt of young people is a serious problem. This paper reports evidence gained from interviews with counsellors of youth and family services and in particular on a youth and family services centre in regional Victoria. 13

RMIT Submission to Consumer Credit Review Observations are made about the level of understanding of the consequences of mismanagement of a credit facility by young people. Recommendations are made that a greater appreciation be taken of the role of family and culture in the forming of money management skills and attitudes and that providers of credit and other services take a greater responsibility in taking a role in that education process. Comments included in this paper may also provide positive suggestions for the relevant authorities and the newly formed Financial Literacy Foundation. Literature Review on Personal Credit and Debt in Australia The literature on personal debt in Australia is sourced from consumer bodies, regulators and academia. This review has benefited from the input of consumer organisations and hence brings together literature that is not always accessible. All agree that more research is needed, particularly on financial decision-making. The literature survey shows the main gap lies in the study of the social and cultural dimensions of debt, credit and decision-making. With the inclusion of the social and cultural perspectives, financial decision-making no longer remains an individual, economic issue. There is a further need to measure the impact of these cultural factors so that they can be part of models of consumer behaviour that are beginning to underlie strategies regarding financial literacy, provision of credit and regulation. The different literatures agree there are limits to the rationality of the market and that adequate disclosure of, for example, the terms of a loan is a necessary but not sufficient condition for decisions that make for consumer well being. They agree there needs to be an integrated approach keeping in mind the four prongs of financial literacy, credit provision, regulation, and social, cultural and behavioural aspects of financial decision making. There remain differences in the emphasis that is placed on each of these three aspects. Consumer advocates point out that debt and related decision-making by low-income families is part of the wider story of the aspirations, and the needs of a group that is at present at the “margins”. Credit is a means of “inclusion”, rather than a matter only of financial literacy. Hence they stress the supply of low-cost or no-cost credit; a combination of savings and community credit plans; financial literacy; together with plugging the holes in the legislation and its implementation. They welcome the increased cooperation between consumer and financial organisations but stress that steps have to be taken to ensure that exploitative industry practices are curtailed. Household debt and credit A distinction may be drawn between “debt” and “credit”. Following Kempson et al (2004) the term „debt‟ is used to refer to two different situations. Firstly, “people are said to be „in debt‟ if they have fallen behind with the payments on their household bills and commitments” (Kempson, McKay, & Willitts, 2004). This is similar to the notion of “financially constrained” households, that is, those households who are having difficulty paying their bills (Cava & Simon, 2005). Cava and Simon (2005) interpret financial constraint as having difficulty paying bills because of a lack of cash. They identify seven measures drawn from the HILDA (Household, Income and Labour Dynamics in Australia), 2001 and HES (Household Expenditure Survey) 1993-94 and 1998-99 data. Financially constrained households are those that: (i) could not pay their utility bills due to a shortage of money; (ii) could not pay their registration or insurance on time (rent and mortgage in HILDA); 14

RMIT Submission to Consumer Credit Review (iii) pawned or sold something due to a shortage of money; (iv) went without meals due to a shortage of money; (v) were unable to heat their home due to a shortage of money; (vi) sought assistance from welfare organisations due to a shortage of money; and (vii) sought financial help from friends or family due to a shortage of money (Cava & Simon, 2005). It is this sense of personal debt and financial constraint that is the focus of the study. Figure 1 indicates the percentage of financially constrained households reporting each problem.

Figure 1: Measures of Financial Stress (per cent of constrained households reporting each problem)

Source: Cava and Simon, 2005 Not all low-income households are financially constrained. There is a high proportion of older people who own their homes without a mortgage (Australian Bureau of Statistics, 2004). However, households that receive Centrelink payments are poor. It is clear from research by the Brotherhood of St Laurence that except for couples or people over 65 on support pensions, all households that receive Centrelink payments fall below the poverty line (See Figure 2). Employed singles are the most disadvantaged, but in the second category are employed couples and single parents with children (Brotherhood of St Laurence, 2004a). The Henderson Poverty Line has been the most widely used measure of poverty in Australia. However the measurement of poverty taken in the HILDA (2004) study is more dynamic, as poverty is seen as both short and long-term. The HILDA study shows that households can move in and out of poverty due to changing situations. The study found that only 3.8 percent of those 15

RMIT Submission to Consumer Credit Review surveyed were deemed poor on each of the three years of the study (Melbourne Institute of Applied Economic and Social Research University of Melbourne, 2004). Younger households are likely to borrow more to build up assets which will be repaid through their middle years. This debt is likely to reduce as the household head gets older (Cava & Simon, 2005). Other socio-economic variables noted were: high rates of poverty among unemployed people, sole parent families, people with disabilities, indigenous Australians and some groups of immigrants and refugees. A detailed analysis of the HILDA Survey would further expand our knowledge in this field.

Figure 2 indicates the Henderson Poverty Line which is compared to the Centrelink Income Support for a number of categories. The difference between the two figures is shown as the amount by which the income payments fall below the Henderson poverty Line.

Figure 2: Centrelink Income Support and the Henderson Poverty Line

Source: (Brotherhood of St Laurence, 2004a) Access to credit and financial exclusion Access to credit is an important element of belonging to society. Research in Australia shows that people are financially excluded because of a lack of affordability and access (Connolly & Hajaj, 2001; Kliger, 2004). Unlike international experience financial exclusion in Australia does not necessarily translate into being unbanked but being „underbanked‟ – that is they have 16

RMIT Submission to Consumer Credit Review difficulty accessing the most relevant financial services (Connolly & Hajaj, 2001; McFarlane, 2003). The ANZ Bank, drawing on market surveys, finds that low savings and income levels are the most likely indicators of financial exclusion. As a result …the sectors of the community most likely to be at risk of financial exclusion include people in poverty, people from Indigenous backgrounds, people with a disability and people on social security benefits. Long-term financial exclusion can be caused by factors such as financial illiteracy, learned dysfunctional credit or savings behaviour and intergenerational exclusion (ANZ Bank, 2004, November). These findings are substantiated by other studies (Commonwealth of Australia, 2004; Connolly & Hajaj, 2001; Kliger, 2004; Russell & Wakeford, 2005). Drawing on the Roy Morgan Finance Monitor data, ANZ finds that 0.8 percent of Australia‟s adult population that is over 120,000 people can be considered to be financially excluded from the financial system. Two examples follow which indicate the developing partnerships undertaken by business and community support groups to provide access to credit facilities and improve financial literacy. ·The National Australia Bank has partnered with Good Shepherd Youth and Family Service to develop a low interest loan Step Up Loan Program for low-income consumers (Schilling, 2003). The Step Up program was aimed at breaching the gap between no interest loans and mainstream credit. Providing access to appropriate and affordable mainstream financial services is a way to promote social and economic participation and empowerment for people on low incomes (Good Shepherd Youth and Family Service, 2004). The pilot program commenced in October 2004 and will go through to October 2006. The loans are for between $800 and $3000 for the purchase of necessary household goods and services. The interest rate is 7.15%. ·Citigroup and YWCA have entered into a corporate community partnership to run Finance First, a financial literacy program for low-income families in NSW. The program is designed to deliver financial literacy education to primary school children and their parents, using the family context to reinforce learning outcomes (Citigroup & YWCA, 2003). These are hopeful signs of a changing climate. Industry practices however continue to entice low-income consumers into over-commitment by unsolicited offers for credit cards and mortgage extension loans. There are also unsolicited offers to increase the credit limits on home loans and credit cards (Kliger, 2004). As Connolly and Hajaj (2001) have noted, “Consumer organisations have argued for many years that banks, whether acting deliberately or not, have created a “bank fee poverty trap” from which their poorer customers are unable to escape. “ (Connolly & Hajaj, 2001). A further example is provided to indicate an initiative relating to no-interest loans. The Good Shepherd‟s NILS (No Interest Loan Schemes) offer access to credit for essential household items, medical services or products and high energy efficient products. This credit is without any fees, charges or interest repayments. For many people, access to a no interest loan increases their standard of living, their self esteem, their confidence in managing their finances, their consumer knowledge as well as addressing the immediate need for an essential household item (Good Shepherd Youth and Family Service, 2004).

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RMIT Submission to Consumer Credit Review The latest development is a No Interest Loan Scheme called Better Energy Appliance Loan Program in partnership with Origin Energy. Colette McInerney, Manager, Microfinance, Good Shepherd Youth and Family Service, says, These loans are to purchase a limited catalogue of high energy efficient goods (fridges, washing machines, and dryers) with the view of cutting energy costs over the longer term. This is also a pilot program and is available across a number of local government areas (Melbourne, Darebin, Moreland, Yarra, Brimbank, and Mornington Peninsula Shire Council). We have broadened out the income eligibility criteria to include: Centrelink Health Care Card, Pension Card, and/or in receipt of Family Tax Benefit Part A - with the hope that we might capture some of the 'working poor'1. The Brotherhood of St Laurence also provides no-interest loans of up to $1,000 for household goods to people on low-incomes. Payday lending Payday lending is an important though expensive way of getting money to pay bills or cover living expenses for low income people. The professional service makes it more respectable than going to the pawn broker (Wilson, 2002). Nearly two-fifths of the (38%) people who borrow from payday lenders receive Centrelink benefits. More than three-fourths (76%) had no formal qualification. The average payday borrower is equally likely to be male or female in their late twenties or early thirties, Australian born and from an English speaking background. Sole parents with dependents are particularly vulnerable to financial shocks given the various expenses associated with children i.e. education and health (Wilson, 2002). Wilson measured the cost of a $200 loan for a period of two weeks and found that the typical cost ranged from $48 to $69 for the two weeks - an annual percentage rate of up to 700%. He found that the people who used this debt were not protected by the Uniform Credit Code. However, the lack of other alternatives that were as convenient and easy to use, meant that 40 percent of those who had borrowed from payday lenders had not borrowed from anyone else. Payday lending was also seen as less open ended than credit card debt and not as embarrassing as borrowing from friends. There was no stigma attached to using a payday lender as it was seen as a legitimate way of accessing credit. Wilson noted that the Centrelink advance payment of $500 was accessed by 20 percent of consumers. His research did not find evidence to support the assumption that pawnbrokers and payday lenders are serving the same consumer base. Only 15 percent of payday loan borrowers had used a pawnbroker in the past 12 months. person to a particular store or provider, overcharging, lending for alcohol and allowing the person‟s relatives to gain credit (Renouf, 2002). Financial literacy The most useful studies connecting the perspectives of consumers, providers and the government are the Australia and New Zealand Bank‟s study of financial literacy in 2003 (Roy Morgan Research, 2003), and the discussions around the paper Australian Consumers and Money (2004)

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Interview with Colette McInerney, Manager, Microfinance, Good Shepherd Youth and Family Service, 18 may 2005.

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RMIT Submission to Consumer Credit Review (Commonwealth of Australia, 2004) prepared by the Treasury‟s Consumer and Financial Literacy Taskforce. These have been useful exercises aimed at placing financial literacy, its measurement and implementation at the centre of policy to empower consumers. These exercises have been generally supported. The main criticism has come from consumer bodies that see this euphoria about financial literacy blocking out the needs to tackle the exploitative provision of credit and socio-economic aspects associated with families at risk. The concept of financial literacy is broader than previous approaches that saw a linear approach between information given and decisions made. It includes the psychological dimensions of decision-making and also notes cultural differences in attitudes to debt. Throughout the discussions, money and debt are seen as wholly economic phenomena. The consumer is rightly at the centre of the model. But it is always the consumer as an individual, rather than the consumer as a member of a household or family. The useful discussion around financial literacy would be strengthened if it included the growing body of literature on the social and cultural meanings of money. The ANZ study There have been previous studies of financial literacy (Chen & Volpe, 1997; KPMG Peat Marwick LLP, 1995; Mandell, 1997; Oppenheimer Funds/Girls Inc, 1997; Princeton Survey Research Associates, 1996; Vanguard Group, 1997; Volpe, Chen, & Pavlicko, 1996). In the Australian context, the ANZ study is the first to explore the dimensions and extent of financial literacy on a national basis across the broad spectrum of financial issues. This report serves as a benchmark for measuring and improving consumer financial literacy levels. The results of the survey are important for consumer education as well as ensuring that the bank delivers effective services. The survey notes that Financial literacy is about enabling people to make informed and confident decisions regarding all aspects of their budgeting, spending and saving and their use of financial products and services, from everyday banking through to borrowing, investing and planning for the future (Roy Morgan Research, 2003). It defines financial literacy as “The ability to make informed judgements and to take effective decisions regarding the use and management of money” (Roy Morgan Research, 2003). The measurement of financial literacy took into account “knowledge and understanding, behaviour, attitudes, perceptions and awareness as they relate to” (Roy Morgan Research, 2003) mathematical literacy and standard literacy; financial understanding; financial competence and financial responsibility. Hence financial literacy is more than counting the cost of credit but is placed within the broader context of the attitudes towards and the management of money. Overall, the story is positive. However, in contrast to Malbon‟s (1999) findings about socioeconomic factors and credit decision-making, the ANZ survey found there was an association between low levels of financial literacy, low education, unskilled work, lower incomes and savings levels. They also found that the lowest levels of financial literacy were associated with single people, young people (18-24 years) and those aged 70 years and over. Australian consumers and money

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RMIT Submission to Consumer Credit Review In February 2004, a task force was announced by the Federal Government to develop the National Strategy for Consumer and Financial Literacy. In June 2004 the taskforce released the discussion paper “Australian Consumers and Money” which called for community consultations (Commonwealth of Australia, 2004). The Taskforce produced a multi-faceted paper. Placing the consumer at the centre, it integrates macro developments in the regulatory environment, the economy, financial and political institutions. It also takes into account a person‟s background and socio-economic status, together with unique personal characteristics. Life stage is equally important for needs and wants change. The paper also focuses on the skills that are needed to make financially advantageous decisions and how these skills can be acquired. For these reasons, the paper has been lauded. At the centre of the paper is a consumer behaviour model (Figure 3). It visually depicts the relationships between the different factors contributing to financial decision making. It is not a model in the sense of being productive. The model remains important for it summarises their understanding of how Australians deal with and think of money. In a later section it is suggested that an increased emphasis on culture would ensure that money is seen more in the context of a person‟s social and cultural context, rather than seeing money purely as an economic phenomenon. The Taskforce paper elicited a wide variety of responses from consumer bodies, credit providers and others. Overall, the reaction has been favourable. In the next section we focus on the reaction of some consumer organisations.

Figure 3 outlines the consumer behaviour model produced by the Consumer and Financial Literacy Taskforce.

Figure 3 : The Consumer Behaviour Model

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RMIT Submission to Consumer Credit Review

Source: (Commonwealth of Australia, 2004)

Consumer bodies react Consumer organisations that responded to the Discussion Paper were in favour of initiatives aimed at increasing financial literacy as part of the mix of measures taken. However they warned 21

RMIT Submission to Consumer Credit Review that consumer credit problems often resulted from exploitative practices of financial providers who profited from advertising and marketing goods and services that would harm people of low income. Moreover, financial literacy was only one factor in decision-making. More research was required on the causes of financial problems. Consumer information needs to be simpler and more trustworthy. Thus a sole emphasis on financial literacy to the exclusion of other factors is not desirable. As the Consumer Credit Legal Centre (NSW) Inc said, On balance, CCLC is in favour of initiatives aimed at increasing financial literacy in the community, particularly if it incorporates general numeracy. However, while many people make poor financial decisions, this is not exclusively due to low financial literacy. We agree that financial literacy has a role to play in improving these problems, but we are of the view that there are a few fundamental flaws in the approach taken in the Discussion Paper. In particular, there are erroneous underlying assumptions that obscure the real source of this problem (Consumer Credit Legal Centre (NSW) Inc, 2004). Some of these assumptions are that: · Poor financial decision making is the result of low financial literacy; · With financial literacy there will be uniform improvements in wealth. CCLC points out that “the reality is that some parts of the industry thrive on the consumers‟ making poor financial decisions” (Consumer Credit Legal Centre (NSW) Inc, 2004). Their advice and casework experience show that poorer consumers have problems getting access to mainstream credit. They also find it difficult to respond adequately when credit problems arise. Greater financial literacy about mainstream credit products and services is unlikely to influence this situation. The emphasis needs to be on providing a safer market place. CCLC says: Financial literacy is not in and of itself the only solution to consumer problems. We argue that financial literacy is likely to have only a minimal effect on reducing vulnerability to exploitation and unmanageable debt. The mere provision of information to consumers is not likely to bring about permanent behaviour change. It cannot, and indeed must not, distract the government away from providing or encouraging the provision of appropriate and varied choices, and encouraging lenders to take more responsibility by ensuring that they perform proper credit assessment and do not participate in exploitative practices (p. 2). The Brotherhood of St Laurence argues that it is overly simplistic to see a direct causal relationship between socio-economic factors and financial literacy on the one hand and financial literacy and decision making on the other. The situation is more complex and requires a change of mindset. They say: A broader understanding of human behaviour is certainly important in addressing consumer and financial literacy….The Brotherhood often observes a feeling of hopelessness amongst people on a low-income, which results in them sustaining themselves from week to week, without clear aspirations. This leads to a lack of interest in longer term issues, such as saving or building a credit record. A change of mindset needs a more powerful circuit breaker than improved financial literacy (Brotherhood of St Laurence, 2004b). They also point to formal information sources being distrusted with information from friends and family being preferred. Consumer education in school can however have some effect. They conclude: 22

RMIT Submission to Consumer Credit Review The Brotherhood appreciates the Consumer and Financial Literacy‟s discussion paper as we believe financial difficulties are a significant aspect of poverty. However, the Brotherhood would recommend a broader focus on other financial issues, rather than just financial literacy. Most people on low-incomes are excluded from mainstream financial services and thus financial literacy needs to be accompanied by improved access. We would also recommend broader research into the needs and barriers for people on lowincomes in accessing financial services. Whilst we acknowledge individuals need to take some personal responsibility for managing their money, it is also important to research structural issues that affect individuals, such as government regulations, marketing and bank policies (Brotherhood of St Laurence, 2004b). These points are particularly pertinent as the direct causal connection between financial literacy, individual and economic well-being continues to be made without a focus on consumer life events, the circumstances and cultural background of different groups. The Commonwealth Bank recently measured the impact of a lack of financial literacy on a person‟s economic well-being (Commonwealth Bank Foundation, 2005). The study concluded that by increasing the financial literacy of the 10 percent of the population with the lowest scores over a ten-year period, Australia's economy would significantly benefit with an increase in GDP by $6 billion per year and the creation of 16,000 new jobs. There are concerns however about the relevance of this report for low-income consumers. The report was based on telephone interviews with 5,000 Australians in August and September 2004. Some of the scenarios focused on decisions about long term and liquid investments, voluntary super, ways of minimising tax, secured loans, life insurance, and donating money from pre-tax pay. These are not issues that are relevant to consumers below the poverty line. It also did not take into account a consumer‟s life events that are an essential ingredient of the Consumer Behaviour Model. A Cultural Consumer Behaviour Model The Consumer Behaviour Model remains an important tool of analysis and policy. We think it would be more useful if culture was seen as an important macro factor, rather than just one of many aspects that influence a person‟s decision-making (See Figure 4). This is because money is a social and cultural phenomenon. Individual and family aspirations are couched within a framework of materialism, that is "…the belief that material goods are the chief source of happiness or unhappiness in life" (Belk, 2001). People most often see money as a tool to make possible their life choices and aspirations, as a way of belonging to Australian society (Kliger, 2004). The questions facing our “families at risk” are often „What do I do to replace the broken washing machine‟, „How do I get enough money to pay for the school books?‟ „How can I provide choices for my children?‟ „Can they have access to mobile phones and the Internet?‟ The choices for credit are also varied depending on cultural background and the possibility of family support. It is in this context that the decisions have to be made about the most accessible and affordable way of getting credit. The management and control of money within a household is impacted not only by a family‟s socio-economic status, but by its kinship and marriage patterns, and the ideology of family and marriage (Pahl, 1990, 1995, 1999; Singh, 1997; Waseem, 2004). These issues are discussed in greater detail in the accompanying literature review on personal debt and credit. It is important however to state that in Australia, among middle-income Anglo Celtic couples, the domestic financial unit is the couple. Hence information about money is most often shared between husband and wife. However there is a difference between the ideology and reality of sharing of 23

RMIT Submission to Consumer Credit Review money management and control. This is particularly true where the boundaries of family and business money are nebulous. A study of women in small business showed that in husband wife businesses where the man is seen to be the generator of wealth, the woman may be informed, but not have the power to inform decisions. This is an „informed powerlessness‟ (Singh, 1995). The middle-income Anglo Celtic boundaries and management of money are distinctive in that they differ from the patterns most often seen in Asia, Africa, the Pacific and many countries in Europe. The extended family, variously defined, is seen as the domestic financial unit. Hence money and information about money is common to a broader group of people. In Australia, these cultural differences come most to the fore in Aboriginal groups where sharing within the family, rather than individual saving is the moral norm (Martin, 1995, n.d; Sansom, 1988; Senior, Perkins, & Bern, 2002). In New Zealand, the different boundaries of money influence money management in the Pakeha, Maori and Pacific Islander households (Fleming, Taiapa, Pasikale, & Easting, 1997). Figure 4 highlights the modification that is suggested for the consumer behaviour model. It emphasizes a greater focus on the role of the family and culture in forming attitudes and money management skills on all other aspects of the model.

Figure 4: A Cultural Consumer Behaviour Model

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Consumer education and financial literacy

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RMIT Submission to Consumer Credit Review There has been a renewed push for consumer education dealing with financial literacy. In June 2003, the ANZ released the results of its survey on Financial Literacy. Soon after, the Australian and Securities Investments Commission (ASIC) released a discussion paper on Financial Literacy in Schools to examine the existing levels of financial literacy teaching in secondary schools and to present options for improving those levels (Australian Securities & Investments Commission, 2003a). Consumer Affairs Victoria has also summarised developments in consumer education in schools in Australia within an international perspective (Consumer Affairs Victoria, 2003). These studies conclude that consumer education particularly relating to financial literacy is vital; particularly to address youth debt, but more needs to be done. However in Australia, consumer education has lacked resources, encouragement and has not been given sufficient importance. Time spent on consumer issues has been patchy. The teaching does not cater to a variety of learning styles and curricula have not sufficiently taken into account the needs and perspectives of the young people they address. There also need to be more resources available for teachers (Consumer Affairs Victoria, 2003). The verdict on the impact of consumer education in schools on financial decision making is mixed. Consumer Affairs Victoria concluded that consumer education in schools has helped youth make better decisions about money in Australia, US and UK. But it is recognised that information gained in school is only one of the many kinds of information that influences decision-making. The Commonwealth Bank study (Commonwealth Bank Foundation, 2005) found that only 31 percent indicated that studies at school was their main source of financial knowledge. A research report on youth debt prepared by Dangar research on behalf of The Office of Fair Trading NSW (2003) indicated a looming problem of young people in debt. Despite the efforts of the formal education process, young people are either still attending or leaving school without acquiring the skills to handle debt (Dangar Research, 2003). Consumer Culture Consumer culture is known as capitalist culture and is „the privileged medium for negotiating identity and status within a post-traditionalist society‟ (Slater, 1997). It arose in the West from about the eighteenth century onwards „as part of the west‟s assertion of its own difference from the rest of the world as modern, progressive, free, rational‟ (Slater 1997). He also claimed it was the 1920‟s post-war reconstruction period that saw all of the features that make up the consumer culture today in Australia, take on their mature form. This period witnessed the emergence of a modern norm concerning how consumer goods are to be produced, sold and assimilated into everyday life. Consumer culture as we know it in Australia, has had a profound impact on our society and community. Slater (1997) defines a consumer culture as a social arrangement in which „the relation between lived culture and social resources, between meaningful ways of life and the symbolic and material resources in which they depend, is mediated through markets.‟ He argues this can clearly be evidenced in our day-to-day activities, in the clothes we wear, the car we drive, the “toys” we have to have, our susceptibility to marketing and most of all by the meaning we attach to process of “consuming” these goods. Not only does the consumer culture shape our day-to-day activities, it has leeched into our very psyche, our very moral and ethical beings. Langer (1996) agrees with Slater when she states that „consumer capitalism not only provides the structural conditions for our existence, but the cultural conditions for our formation as individual subjects.‟ The case study below exemplifies this point. 26

RMIT Submission to Consumer Credit Review SUZIE’S MORNING 2 Suzie Funkychick woke up at 8am to the buzzing of her Panasonic alarm clock in order to get ready to go to the university where she was studying economics. Suzie put on a Berlie bra and underwear from Bonds, a bright yellow Billabong t-shirt with fluoro lettering across the front, a pair of faded hipster Levi jeans and a pair of last season‟s Birkenstock sandals. She went to the bathroom and scrubbed her face with Dove soap, brushed her teeth with Colgate Total toothpaste and a Colgate Reach toothbrush. She rinsed her mouth with Listerine mouthwash. She put on some Nivea deodorant and dabbed a bit of CK perfume on her neck. She brushed her hair that was dyed with the latest L‟Oreal hair colour and strategically placed her Oakley sunglasses on her head. For breakfast she had a glass of Australian Juice Co. orange juice and a bowl of Kellogg‟s Cornflakes with Rev milk. She also made herself a cup of Moccona coffee and added one teaspoon of Equal to it, which she quickly drank. She made herself some lunch with Helgas bread, Light Philadelphia Cream Cheese and salad. She grabbed her textbooks that had recently been purchased with her newly acquired Virgin Credit Card, Milleni wallet and Nokia mobile phone and dumped everything into her Country Road bag. She then ran out the door to uni. In the afternoon she got a telephone call from a marketing survey company who asked her whether she felt she was influenced by advertising. „I am aware of advertising‟, she replied, „but I am definitely not influenced by it.‟ Case Study: Brayton Youth and Family Services This paper focuses on the issue of one cohort of low-income youth and their experience with a commonly accessed form of credit as demonstrated by interviews with financial counsellors. A study conducted for the National Welfare Rights Network (2005) estimates that 14% of the population aged 15 –24 are at risk. They are either unemployed or not at work. This group of young people feature strongly in the clients of Brayton Youth and Family Services, a division of the Salvation Army based in Shepparton, northern Victoria. The Director of Youth Services, Mark Rumble, stated that: Brayton provides accommodation and other assistance to approximately 200 young people per annum. They are aged 13 to 18 years of age and the average length of accommodation is about 45 days but varies depending on need. Some stay for one night and others may stay for up to one year. These young people are generally without a home having been forced out of their family home by parents or have left by choice. Many have contact with drugs and get by through living with friends, handouts and Centrelink benefits.3 All young clients of Brayton are in receipt of a Youth Allowance and a Living Away From Home Allowance which is approximately $200 per week. According to the Henderson Poverty Line a young person requires approximately $300 per week for basic living expenses. The Centrelink payment is about 38 per cent below the Henderson poverty Line (NWRN 2005).
2

An adaptation of that found in Berger Arthur Asa, Ads, Fads and Consumer Culture: Advertising’s Impact on American Character and Society, Roman Littlefield Publishers, New York, 2000, p.45, reported in West Heidelberg Community Legal Service, A Report into Youth Debt, January, 2004 3 Interview with Mark Rumble, Director of Youth Services, Brayton Youth and Family Services, 1 July 2005.

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RMIT Submission to Consumer Credit Review Anita Smith, a youth worker with over 20 years experience in youth and financial counselling observed that: the level of homelessness among young people is the worst that I have seen. I have never seen such abandonment of kids as ever before.4 NWRN (2005) indicate that a possible explanation for the level of homelessness is that the cost of raising teenagers increases as they get older and the level of social security falls once a child reaches age 16. Mark Rumble also commented: …over 90 per cent of the clients at Brayton have already applied for and received the $500 cash advance from Centrelink. As well as providing short term and longer term accommodation for young homeless people, Brayton staff provide mentoring on various life skills including money management and family counselling matters. A common observation offered by financial counsellors interviewed on this matter is that the $500 cash advance per annum provided by Centrelink to those over 16 years is too accessible. As soon as the young person is eligible to apply they approach Centrelink for the advance. According to the interviewees, Centrelink staff does not and are not obliged to undertake any investigation as to purpose or ability to repay the loan, it is given as a matter of course. The cash advance is provided on application to the recipient‟s bank account and, although no interest is charged on the advance, Centrelink reclaims repayments at a rate of $38.50 per pay period. There is no risk to provider of the credit facility as the repayments are guaranteed by the deduction of $38.50 per fortnight from the allowance. A major problem reported by all interviewees is that there is universal „blowing‟ of the advance on latest mobile phone or other „luxury‟ good as soon as the young person becomes eligible. Comments about the role of consumer culture and the need of young people to “be with it” are demonstrated by the observation of the common pattern of spending with the $500 cash advance. As indicated earlier, the literature suggests that consumer culture is dominant in young peoples lives and plays a large part in decision making. The consequence of such action is that less money is available from the young person‟s allowance for the next 13 pay periods to meet other expenses. For example, if rent takes 30 per cent to 40 per cent of an allowance as estimated by NWRN (2005) before the repayment is deducted, then this increased the percentage of the allowance required for rent and then creates other pressure on living expenses. In addition, if a young person has committed a Centrelink breach or received an overpayment then the clawback can reduce further the net amount of the allowance to a maximum reduction of 25 per cent. As the allowance is determined to cover basic needs then any reduction would see the young person suffer a reduction in their standard of living. Another problem observed by financial counsellors is the matter of bank fees. Hosie (2005) noted that to be paid a Centrelink allowance, a client must provide bank account details so that payments can be made directly to the person‟s account. Many young people have little choice but to use a direct debit facility for purposes of paying utility accounts, rent or other such payments as they often do not accumulate enough funds to pay the accounts in larger amounts. If the balance in the account is low and the regular payments are reduced as a result of the

4

Interview with Anita Smith, Financial Counsellor, North East Salvation Army Action for Youth, 16 July 2005.

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RMIT Submission to Consumer Credit Review repayment of an advance it is frequently observed that it is even more difficult for a young person to meet their normal living expenses when a bank fee for “insufficient funds” is incurred. A further item of concern raised by Smith and Carol Francis5 is the matter of a young person‟s failure to think of consequences of decision-making. The example given is the effect of a young person who buys a car with borrowed money. Insurance may or may not be taken out but even if it is and it eventuates that the car has been modified from the manufacturer‟s specifications and an accident occurs then it is possible for insurance company to avoid the contract with the young person for misrepresentation. The young person may then have to borrow more to pay off the damage. Recommendations Recommendations arising from discussions with the financial counsellors have the intention of improving the education levels of young people classified as “at risk”; developing a greater understanding of financial literacy on a broader front; and putting in place improved codes of conduct for providers of financial services to young people. First, it is recommended for Centrelink to take the lead in requiring young people to undertake a counselling session prior to the grant of the $500 cash advance. As this is often the first stage of credit use by young people the process of a referral to a third person to discuss the ramifications of the advance on future income needs may be seen as a very positive experience and may prove to be an invaluable lesson in more appropriate uses of credit in the future. When adults seek a loan for a specific purpose the general rule is for a capacity to repay exercise to be completed by a bank officer before the loan is granted. The concept is the same but the scale is different. A view put forward by Rumble is that: …the current policy of Centrelink seems to hinder the work done by Brayton staff but with a simple referral requirement that a review of the impact of the cash advance be undertaken the provision of the credit could be turned into a very positive experience rather than perpetuating the current effect. A suggestion put forward by NRWN (2005) is that Centrelink should consider spreading the repayment schedule over a longer time frame. If one advance per annum is permitted then repayments could be spread over the next 26 payments rather than 13. Second, is the suggestion that banks consider a reduction of fees on low balance accounts or to provide a warning system so that the likelihood of an automatic fee for having insufficient funds in the bank at the time of a direct debit is made is therefore reduced. This would avoid young people of limited means incurring unnecessary costs. Third, it is suggested that the Financial Literacy Foundation consider aspects of culture and role of family in its proposed public education campaign. This would be intended to provide a greater focus on education of money management skills, not just for the lower middle class but also and even more importantly, for one of the most vulnerable socio economic groups in society. As indicated by the Brotherhood of St. Laurence (2004) it is important to adopt a „circuit breaker‟ approach to tackle the „generational poverty‟ problem. Payne (2003) identified the characteristics of generational poverty which included the observation that those caught in generational poverty live for the moment without considering future ramifications. The Federal Government‟s initiative in creation of the Financial Literacy Foundation offers scope for change.
5

Interview with Carol Francis, Financial Counsellor, Banyule Community Health Service, 7 April, 2005.

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RMIT Submission to Consumer Credit Review Mark Rumble provided an outline of a particular success story about Brayton‟s influence with one client from some years before. He commented: ….had a dependency on drugs and was able to save the required amount from her allowance to pay for drugs. A few years later she managed to kick the habit but was able to transfer her saving skills to provide for the care of her young children even to the extent of budgeting for the burning of firewood. She would ask her young offspring “would you like to be warm tonight or in the morning?” As poignant as it may seem, this example provides hope that with dedication and opportunity, the development of money management skills can be achieved.

Summary Although a relatively small and often unnoticed cohort of the population, the young people represented in the Brayton Youth and Family Services case study, illustrate the need for financial literacy development at a number of levels of society. Roles of family life in the development of basic money management skills and also through the formal education system are prime examples of a need and an opportunity for change. The study also indicates that changes can be made at the credit provider‟s end and also the service entities such as banks to provide the circuit breaker so needed if any change is to be made to break the cycle of generational poverty. The creation of the Financial Literacy Foundation provides cause for hope that political will to tackle the issues, which currently inhibit any chance of improvement, can be addressed in meaningful ways.

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RMIT Submission to Consumer Credit Review

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RMIT Submission to Consumer Credit Review Citigroup, & YWCA. (2003). Citigroup and YWCA NSW put „Finance First‟. Retrieved 11 May, 2005, from http://www.citibank.com/citigroup/press/2003/data/030626b.pdf#xml=http://www.citigroup.com /search97cgi/s97_cgi?action=View&VdkVgwKey=http%3A%2F%2Fwww%2Ecitibank%2Eco m%2Fcitigroup%2Fpress%2F2003%2Fdata%2F030626b%2Epdf&doctype=xml&Collection=pr imary&QueryZip=%28%5B%2E30%5D+finance+first+%3Cand%3E+%28url+%3Ccontains%3 E+%2Fcitigroup%29%2C%5B%2E70%5D++ Commonwealth Bank Foundation. (2005). Improving Financial Literacy in Australia: Benefits for the Individual and the Nation. Sydney: Commonwealth Bank of Australia. Commonwealth of Australia. (2004). Australian Consumers and Money: Full Version - A Discussion Paper by the Consumer and Financial Literacy Taskforce. Canberra: Commonwealth of Australia. Connolly, C., & Hajaj, K. (2001). Financial Services and Social Exclusion. Retrieved 6 May, 2005, from www.chifley.org.au/publications/banking_and_social_exclusion_final_report.pdf Consumer Affairs Victoria. (2003). Consumer Education in Schools: Background Report. Melbourne: Consumer Affairs Victoria. Consumer Affairs Victoria. (2004). Discussion Paper: What Do We Mean By 'Vulnerable' and 'Disadvantaged' Consumers? Retrieved 12 May, 2005, from http://www.consumer.vic.gov.au/CA256902000FE154/Lookup/CAV_Publications_Reports_and _Guidelines/$file/vulnerabledisadvantaged.pdf#xml=http://search.justice.vic.gov.au/isysquery/irl c1c7/2/hilite Consumer Credit Legal Centre (NSW) Inc. (2004). Consumer Credit Legal Centre (NSW) Inc Submission in Response to Australian Consumers and Money - A Discussion Paper by the Consumer and Financial Literacy Taskforce. Retrieved 11 April, 2005, from http://cfltaskforce.treasury.gov.au/content/_download/submissions/ConsumerCreditLegalCentre. pdf Dangar Research. (2003). Youth Debt: The Office of Fair Trading, NSW. Fleming, R., Taiapa, J., Pasikale, A., & Easting, S. (1997). The Common Purse. Auckland: Auckland University Press. Good Shepherd Youth and Family Service. (2004). Shepherd's Voice; Quarterly Newsletter of Good Shepherd Youth and Family Service. Melbourne: Good Shepherd Youth and Family Service. Hosie, K. (2005). “Banking Issues for Low Income Households, Parity, March. Kempson, E., McKay, S., & Willitts, M. (2004). Characteristics of Families in Debt and the Nature of Indebtedness (No. Research Report No 211): Department for Work and Pensions. Kliger, B. (2000). The Cultural Diversity of Money, Credit & Debt: A Case Study of ArabicSpeaking People and People from the Horn of Africa and Vietnam. Melbourne: Financial and consumer rights council Inc.

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RMIT Submission to Consumer Credit Review Kliger, B. (2004). The Road to Debt: Consumer Choice in the 21st Century: A Study of LowIncome Consumers' Use of Credit. Collingwood, Vic.: Good Shepherd Youth & Family Service. KPMG Peat Marwick LLP. (1995). Retirement Benefits in the 1990s: 1995 Survey Data. New York: KPMG Peat Marwick LLP. Langer B. (1996). The Consuming Self in Kellehear Allan (ed), Social Self, Global Culture: An Introduction to Sociological Ideas, Oxford University Press, Melbourne. Malbon, J. (1999). Taking Credit, A Survey of Consumer Behaviour in the Australian Consumer Credit Market. Mandell, L. (1997). Personal Financial Survey of High School Seniors. In Jump Start Coalition for Personal Financial Literacy. Washington, D.C. Martin, D. F. (1995). Money, Business and Culture: Issues for Aboriginal Economic Policy (No. 101/1995). Canberra: Centre for Aboriginal Economic Policy Research, Faculty of Arts, The Australian National University. Martin, D. F. (n.d). Summary: Cash, Autonomy and Relatedness. McFarlane, J. (2003). The Role of Banks in Society. Paper presented at the Banking on the Margins: Promoting a More Financially Inclusive Community, Melbourne. Melbourne Institute of Applied Economic and Social Research University of Melbourne. (2004). HILDA Survey Annual Report 2004. Retrieved 6 May, 2005, from http://www.melbourneinstitute.com/hilda/areport/areport2004-low.pdf National Welfare Rights Network. (2005). “A dog‟s Breakfast” – income support for families and young people, March. Oppenheimer Funds/Girls Inc. (1997). Girls Money and Independence. New York. Pahl, J. (1990). Household Spending, Personal Spending and the Control of Money in Marriage. Sociology, 24(1), 119-138. Pahl, J. (1995). His Money, Her Money: Recent Research on Financial Organisation in Marriage. Journal of Economic Psychology, 16(3), 361-376. Pahl, J. (1999). Invisible Money: Family Finances in the Electronic Economy. Bristol: The Policy Press. Payne, R.K. (2003). A Framework for Understanding Poverty, aha! Process Inc. Princeton Survey Research Associates. (1996). Investor Knowledge Survey. Arlington, VA. Renouf, G. (2002). Bookup - Some Consumer Problems. A Report for ASIC. Roy Morgan Research. (2003). ANZ Survey of Adult Financial Literacy in Australia, Final Report. Melbourne. Russell, R. & Wakeford, M. (2005). Saver Plus: Saving for a Better Future. Paper presented at the Transitions and Risk: New Directions in Social Policy Conference, University of Melbourne, Melbourne, 23-25 February. 33

RMIT Submission to Consumer Credit Review Sansom, B. (1988). A Grammar of Exchange. In Being Black: Aboriginal cultures in `settled' Australia (pp. 159-177). Canberra: Aboriginal Studies Press for the Australian Institute of Aboriginal Studies. Schilling, C. (2003). The Impact of Credit Card Reform on People with Low Incomes (No. 4/2003). Collingwood, Vic.: Good Shepherd Youth & Family Service Inc. Senior, K., Perkins, D., & Bern, J. (2002). Variation in Material Wellbeing in a Welfare Based Economy (No. Working Paper No. 6). Wollongong: South East Arnhem Land Collaborative Research Project, University of Wollongong. Singh, S. (1995). Women, Information and the Family Business. Melbourne: Consumer Advocacy and Financial Counselling Association of Victoria (Inc.). Singh, S. (1997). Marriage Money: the Social Shaping of Money in Marriage and Banking. St. Leonards, NSW: Allen & Unwin. Slater D. (1997). Consumer Culture and Modernity, Polity Press, United Kingdom. Vanguard Group. (1997). Financial Literacy of Mutual Fund Investors. New York. Volpe, R. P., Chen, H., & Pavlicko, J. J. (1996). Personal Investment Literacy Among College Students:A Survey. Financial Practice and Education, Fall/Winter, 6(2), 86-94. Waseem, S. (2004). Household Monies and Decision-Making (Policy Research Paper 23). Canberra: FACS. West Heidelberg Community Legal Service. (2004). A Report into Youth Debt, January. Wilson, D. (2002). Payday Lending in Victoria -A Research Report. Melbourne: Consumer Law Centre Victoria Ltd.

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