While the Banking Royal Commission has exposed a litany of unethical and fraudulent lending practices at financial institutions, the flipside of the coin is the debt help industry.
These are companies that are profiting by offering “debt solutions” or “debt relief” to money-stressed Australians. And that’s a huge market. Personal debt has reached nearly $2.4 trillion nationally, or nearly $100,000 per Australian.
One way they do this is through what’s known as a debt agreement. You might have seen the ads on TV or online – they promise an easy way out of debt for those struggling.
These legally-binding agreements have some great perks. They combine all a person’s debts into one lump sum that can be paid off over up to five years. Creditors are getting money, so they stop calling and sending letters. And if the debtor sticks to the agreement, they won’t have to worry about losing big assets like the family home.
But the fine print paints a more complex picture. A debt agreement is also a form of bankruptcy. It’ll affect your credit rating for up to five years, and can impact on your ability to apply for certain jobs. The repayments can be high, and the company charges its own hefty fees.
