The Role of Legal Hardship Protections in Coping with Debt Problems: Insights from a Survey of Consumers

Abstract

Special protections for Australians in financial hardship have recently been incorporated into the legal frameworks governing the consumer credit, energy, water and telecommunications sectors. These protections have the objective of enabling consumers to avoid the serious legal consequences of financial hardship, such as debt enforcement action in a court or tribunal, or disconnection from an essential service, by allowing them to seek alternative payment arrangements and other forms of assistance from their creditors. In this article, we draw upon the findings of our survey of consumers who have experienced financial hardship to show that these legal protections play a relatively modest role in the overall range of ways in which consumers cope with debt problems. Consumers face significant barriers to identifying themselves as being in need of assistance under these protections, and tend to favour individualistic strategies for reducing spending, even when this may jeopardise their ability to afford basic living essentials. For those who do access assistance from a creditor under the legal hardship protections, its effectiveness may be undermined by the prevalence of unaffordable payment arrangements across our target sectors.

Keywords: Consumer Protection, Financial Hardship, Consumer Credit, Energy, Water, Telecommunications