The Legal and Social Dimensions of Financial Hardship in Australia: Implications for Legal Regulatory and Policy Frameworks
Financial hardship, the reduced ability to meet monetary obligations because of loss of employment, illness or disaster, is an increasing problem for both low-income and middle-income Australians. This project is the first in- depth study of the practical operation of Australia's financial hardship laws, which are designed to protect Australians suffering financial hardship. Major surveys will be undertaken of senior staff of financial dispute resolution schemes, financial counsellors, consumer solicitors and consumer advocates as well as persons suffering financial hardship. The project outcomes will include improvements to dispute resolution involving financial hardship and consumer advisory services, and potential law reform proposals.
Financial hardship – the reduced ability to meet monetary obligations because of loss of employment, illness or disaster – is an increasing problem for both low-income and middle-income Australians. The Financial Hardship Project involves an analysis of the full range of legal frameworks that provide protection for Australians suffering financial hardship, as well as an empirical analysis of how these frameworks operate in practice.
In light of the limited legal and policy research in this area to date, the Financial Hardship Project has four principal aims:
- To undertake a comprehensive, comparative analysis of the statutory frameworks – and in particular, the National Credit Code under the National Consumer Credit Protection Act 2009 (Cth) – that are explicitly designed to protect Australians suffering financial hardship. The project will include research into the dispute resolution schemes that form part of these frameworks, as well as codes of conduct voluntarily adopted by industries.
- To carry out an in-depth multi-dimensional empirical study – using focus group interviews and written surveys – to investigate how these frameworks are understood and negotiated by Australians suffering financial hardship.
- To evaluate, based on the empirical study, whether these legal frameworks and codes of conduct are meeting their policy objectives, and to examine the legal and social consequences of financial hardship.
- To draw conclusions as to whether reform to the legal frameworks is required to address any deficiencies in the existing financial hardship provisions.
For further information, please contact the project Research Fellow, Evgenia Bourova.
The first stage of the Financial Hardship Project was completed between March 2014 and March 2015. This stage involved a comprehensive analysis of the entirety of Australia's financial hardship provisions, followed by the design of a qualitative and quantitative empirical study to determine how these provisions operate in practice.
The second stage of the project involved the execution of the empirical study. Between June and September 2015, we carried out an online survey of over 1,000 Australians who have experienced financial hardship, as well as a survey of financial counsellors around Australia.
Between November 2015 and January 2018, we also held focus group interviews with financial counsellors, consumer solicitors and case workers employed by and associated with organisations working at the forefront of assisting people in financial difficulty. These organisations included Consumer Action Law Centre, Good Shepherd Australia New Zealand and Financial Counselling Australia, as well as Diversitat, Lentara UnitingCare , South East Community Links and Women’s Information and Referral Exchange Inc (WIRE). The focus group interviews covered topics such as the causes and impacts of financial hardship for Australians at different levels of income, as well as specific groups such as women with debt problems caused by economic abuse, people living in rural or regional areas, and recent migrants and refugees from a non-English speaking background.
As part of the second stage of the project, we also carried out a smaller study of data collected by the Financial Ombudsman Service on financial difficulty disputes resolved between 2010 and 2014; and an analysis of the legal frameworks for reporting on hardship practice in the consumer credit and energy sectors.
The third stage of the project was completed in June 2018. This stage involved the preparation of research reports and journal articles drawing on the findings of the empirical study, and making recommendations for law and policy reform. Some of these are available below. More publications will become available in the coming months.
Evgenia Bourova and Ian Ramsay have given the following media interviews relating to the research project:
- Evgenia Bourova, 'Financial Hardship: What it's Like Living with Debt You Can't Repay', Episode 33: We Talk Cents Podcast, WeMoney, 14 June 2021.
- Evgenia Bourova, Focus, ABC Radio Sydney, 28 February 2019.
- Evgenia Bourova, ‘Feeling the Pinch’, Breakfast on Radio Adelaide, Radio Adelaide, 27 February 2019.
- Ian Ramsay, Statewide Drive NSW, ABC North Coast NSW, 26 February 2019.
- E Bourova, I Ramsay and P Ali, 'Debt Can Be a Powerful Tool for Control over Women', The Power to Persuade, 3 April 2020 (online).
- E Bourova, I Ramsay and P Ali, 'Debt Can Be a Powerful Tool for Control over Women', Broad Agenda, 18 March 2020 (online).
- E Bourova, I Ramsay and P Ali, ‘Limitations of Australia’s Legal Hardship Protections for Women with Debt Problems Caused by Economic Abuse’ (2019) 42(4) University of New South Wales Law Journal 1146.
- E Bourova, M Anderson, I Ramsay and P Ali, ‘Impacts of Financial Literacy and Confidence on the Severity of Financial Hardship in Australia’ (2018) 12(4) Australasian Accounting, Business and Finance Journal 4.
- E Bourova, I Ramsay and P Ali, 'What 1,100 Australians Told Us About the Experience of Living with Debt they Can't Repay', The Conversation, 26 February 2019 (online).
- E Bourova, I Ramsay and P Ali, ‘“It’s Easy to Say Don’t Sign Anything”: Debt Problems Among Recent Migrants from a Non-English-Speaking Background’ (2019) Alternative Law Journal (online).
- E Bourova, I Ramsay and P Ali, ‘The Experience of Financial Hardship in Australia: Causes, Impacts and Coping Strategies’ (2019) 42 Journal of Consumer Policy 189.
- P Ali, E Bourova and I Ramsay, 'Financial Hardship Assistance Behind the Scenes: Insights from Financial Counsellors' (2017) 52 Australian Journal of Social Issues 241.
- E Bourova, I Ramsay and M Roberts, 'Reporting on Hardship Practice in the Consumer Credit and Energy Sectors: An Analysis' (2017) 25 Competition and Consumer Law Journal 71.
- P Ali, E Bourova and I Ramsay, ‘The Role of the Legal Hardship Protections in Coping with Debt Problems: Insights from a Survey of Consumers’ (2016) 24 Competition and Consumer Law Journal 77.
- P Ali, E Bourova, J Horbec and I Ramsay, ‘Australia’s Financial Ombudsman Service: An Analysis of its Role in the Resolution of Financial Hardship Disputes’ (2016) 34 Conflict Resolution Quarterly 163.
- P Ali, E Bourova and I Ramsay, ‘The Statutory Right to Seek a Credit Contract Variation on the Grounds of Hardship: A History and Analysis’ (2016) 44 Federal Law Review 77.
- P Ali, E Bourova and I Ramsay, 'Financial Hardship: Insights from a Survey of Financial Counsellors' (Research Report, Financial Hardship Project, Melbourne Law School, The University of Melbourne, December 2015).
- P Ali, E Bourova and I Ramsay, 'Responding to Consumers' Financial Hardship: An Evaluation of the Legal Frameworks and Company Policies' (2015) 23 Competition and Consumer Law Journal 29.
- P Ali, E Bourova and I Ramsay, 'Financial Hardship: The Legal Frameworks' (Research Report, Financial Hardship Project, Melbourne Law School, The University of Melbourne, June 2014).
Links and Resources
The key sectors where financial hardship protections have been put in place are consumer credit, essential services and telecommunications. The hardship protections that apply to each of these sectors are outlined in our 2014 research report, ‘Financial Hardship: The Legal Frameworks’, which is cited above.
a. Consumer Credit
The primary statutory framework that provides protections for Australians suffering from financial hardship is established by the National Credit Code, which is scheduled to the National Consumer Protection Act 2009 (Cth).
- In particular, s 72 of the Code gives consumers the right to apply to their credit provider for a variation of the terms of their credit contract on the grounds of financial hardship.
- For further information about the external dispute resolution scheme available to consumers of financial services, please refer to the website of the Australian Financial Complaints Authority (AFCA).
For some of the key examples of self-regulatory codes of conduct containing hardship provisions in the banking and finance sectors, please refer to the following resources:
- The Australian Bankers' Association (ABA)'s revised Code of Banking Practice 2013, effective from 1 February 2014; and
- The Mortgage and Finance Association of Australia (MFAA)'s Code of Practice, effective from 4 September 2016.
b. Essential Services
At state level, there are also protections for people experiencing difficulties in paying for essential services such as electricity, gas and water due to financial hardship. For examples of hardship protections that apply to essential services customers, please refer to the following statutory provisions and industry codes:
- The National Energy Retail Law (South Australia) Act 2011 (SA) ('NERL'), which contains provisions requiring energy companies to develop financial hardship policies and provide certain kinds of assistance to customers experiencing hardship. The NERL forms part of a national framework for the regulation of the electricity and gas industries, which has now been adopted by the Australian Capital Territory; New South Wales; Queensland; South Australia; and Tasmania.
- The Electricity Industry Act 2000 (Vic) and the Gas Industry Act 2001 (Vic), which, together with the Energy Retail Code (version 11b), require energy companies operating in Victoria to develop hardship policies and provide certain kinds of assistance to customers experiencing financial difficulty. See also the Victorian Essential Services Commission's August 2018 Customer Service Code - Urban Water Businesses, which contains an obligation for urban water companies operating in Victoria to adopt hardship policies.
- Western Australia's Code of Conduct for the Supply of Electricity to Small Use Customers (2012) and Schedule 2 — Compendium of Gas Customer Licence Obligations (2014), which contain hardship protections for Western Australian customers.
For more information on hardship protections in the essential services sector, please refer to the websites of regulators and ombudsman services such as the Australian Energy Regulator, the Energy and Water Ombudsman Victoria and the Economic Regulation Authority Western Australia.
- For the national framework of hardship protections for telecommunications customers, see Communications Alliance Ltd, Telecommunications Consumer Protections Code (2015).
- Professor Ian Ramsay, (Melbourne Law School)
- Associate Professor Paul Ali, (Melbourne Law School)
- Evgenia Bourova, (Melbourne Law School)
Type of Grant
ARC Discovery Project