Labor Backs Calls to Support Financial Counselling Services
Monday, 25th February 2019 at 4:36 pm
Labor has pledged to double the number of community-based financial counsellors in Australia through a $640 million Banking Fairness Fund if it wins the upcoming federal election.
The fund would raise $160 million a year from Australia’s biggest banks to upgrade services available to Australians in financial difficulty, and includes $320 million over four years to increase the number of financial counsellors across Australia from 500 to 1,000.
This pledge follows calls from the banking royal commission final report and charities to increase funding for financial counselling services to prevent vulnerable people being preyed upon by unethical bankers.
Labor leader Bill Shorten, Clare O’Neil and Senator Jenny McAllister said in a joint statement a stronger financial counselling sector was just one part of Labor’s plan to restore fairness to financial services.
They said this funding was expected to provide advocacy, support and advice to an extra 125,000 Australians a year.
“Financial counsellors provide invaluable assistance, free of charge, to Australians who find themselves in disputes with their banks and other financial service providers,” they said.
Demand for financial counselling currently exceeds supply. An October survey by peak body Financial Counselling Australia (FCA) found the sector could only support 60 per cent of people who sought financial counselling services.
FCA welcomed Labor’s announcement on Monday, noting that Australia had one of the highest ratios of household debt to income in the world.
“With data from the ABS showing that three in 10 households are over indebted… doubling the number of financial counsellors can’t come soon enough,” FCA said in a statement.
Labor’s levy would be raised not only from the big four banks, but also from other financial institutions such as the Bendigo and Adelaide Bank, AMP and Macquarie.
FCA said the sector had long advocated for a levy on the financial services industry to properly fund financial counselling services – an approach already taken in the UK.
The peak body also called for a levy to be applied to the telecommunication and utilities sectors, as these organisations “contribute to financial stress, refer their customers to financial counsellors and benefit when they get back on track”.
The new financial counsellors funded through Labor’s bank levy would be able to help Australians pursue fair compensation through the Australian Financial Complaints Authority.
AFCA chief executive and chief ombudsman, David Locke, told Pro Bono News recently his organisation was getting around 11,000 calls a month, with many people in desperate need of advice about financial hardship and their financial situation.
He said financial counselling services were invaluable and it was essential that a sustainable funding model was developed for the sector.
“Financial counsellors provide a myriad of services to the community, including promoting financial capability, reducing the risk of vulnerable and disadvantaged consumers being targeted by predatory businesses, and helping consumers to resolve financial problems and issues,” Locke said.
The federal government meanwhile has committed to a Department of Social Services-led review of the coordination and funding of financial counselling services, in consultation with Treasury and the Department of the Prime Minister and Cabinet.
On Monday, the government announced that Louise Sylvan AM would lead the review.
Sylvan is an adjunct professor at the University of Sydney, chair of Energy Consumers Australia, a director of the Australian Risk Policy Institute and vice-chair of the Australian Advisory Board on Impact Investing.
The review is expected deliver its findings by early April.