Struggling with bills and debt? Be careful where you go for help.
Some services, such as financial counselling, are free and independent, while other services targeting those in financial strife — so-called "debt relief" firms — can be predatory and harmful.
Here's what to know about who can offer free and independent advice, and which services to avoid.
What is a financial counsellor?
Financial counsellors are "qualified professionals who provide information, advice and advocacy to people in financial difficulty," such as those struggling with bills and debt, says Fiona Guthrie AM, CEO of national not-for-profit Financial Counselling Australia.
They're generally available through community-based non-government organisations funded by the government, or community sector organisations such as welfare organisations.
"If you're in financial hardship, you should never have to pay to get out of it," says Claire Tacon, assistant director of financial counselling at the Consumer Action Law Centre, which operates the not-for-profit National Debt Helpline for Victoria.
"I think often people think that you're going to get a better service if you can pay for it, but financial counselling is one service that you should never have to pay for."
Financial counsellors are also customer advocates — "we're on the client's side," Ms Tacon explains — and they're independent, meaning they don't receive commissions from third parties for their services.
Financial counsellors can help people understand their financial rights and responsibilities. They can also assess your financial situation; help you negotiate with government agencies, your mortgage provider, your landlord, utilities and other creditors; ask for your debts to be waived or paused in some circumstances; and assist you if you're being harassed by debt collectors.
They have specific knowledge about the credit, bankruptcy and debt collection laws, concession frameworks and industry hardship practices, says Ms Guthrie, who's based in Melbourne.
"They're also trained in negotiation and counselling and offer emotional support and a listening ear when people really need it," she adds.
Why demand for financial counselling is rising
Ms Tacon says calls to her team have risen by 50 per cent over the past year in Victoria, as the financial counselling sector has faced a "huge uptick in demand".
"This time, for the first time ever, the most common reason people are calling is about their mortgage [and] housing arrears. [In the past] it's always been that credit cards have been the top issue, followed by energy bills."
The profile of service users has also changed, Ms Tacon says.
"It's always been that people would call us who have had something go wrong in their lives … a relationship breakdown or someone has stopped work to care for someone," she says.
"But more and more we're getting people where nothing's changed [except] the cost of living and the interest rate increases. It's just meant that when their income hasn't gone up, they're not able to afford everything."
The difference between financial counsellors and financial advisers
Financial counsellors provide different services to financial advisers — although the two are often confused, Ms Guthrie says.
"Essentially, financial planners/advisers give advice to people who have money to invest. Financial counsellors work with people who are in debt or are not able to meet their ongoing expenses," she says.
Financial counsellors must have a Diploma in Financial Counselling, while financial advisers need an Australian Financial Services (AFS) licence to operate.
If you decide it's a financial adviser you need, keep in mind that some are independent, and some are not.
"The law is strict about which financial advisers can claim to be independent, unbiased or impartial," says ASIC's Moneysmart spokesman, Andrew Dadswell. For example, advisers who accept commissions can't claim they are independent.
What to avoid: Predatory 'debt vultures'
What about those ads for "debt relief" or "credit repair" firms promising to deal with your debts and fix your credit rating?
Ms Tacon warns strongly against these services, which operate in a regulatory black hole: Unlike other financial services, debt relief companies aren't required to hold a licence or meet basic ethical standards.
"We call them debt vultures, because they prey on people in financial difficulty. And they're often eager to push people into bankruptcy all for their own benefit, not the clients'," says Ms Tacon.
These services often advertise on radio, TV and online: "if you search 'debt help', you're often going to get a for-profit service," she says.
… And be careful of 'finfluencers'
Experts also warn against relying blindly on social media influencer advice about getting out of debt.
"There's a lot of information about investing online, but some sources can be inaccurate and misleading," says Andrew Dadswell from Moneysmart.
Some online financial influencers ("finfluencers") or self-described "financial coaches" who discuss financial products and services online aren't legally allowed to give financial advice.
And finfluencers often aren't independent: They "often make money and receive "kickbacks" by promoting specific financial information or products. This should be properly disclosed to you – but may not always be," explains Mr Dadswell.
Make sure you do your own research and are comfortable with any investment before signing up, he suggests.
And if you want personal financial advice from a qualified professional that will consider your personal circumstances, make sure the adviser is listed on the Financial Advisers Register.
A final word of warning: "Consumers unknowingly receiving unlicensed advice do not have the same protections afforded to them under the law when they receive advice from licensed providers," Mr Dadswell says.
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