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Debt

Debt is experienced as both a precursor to homelessness and as a feature of people’s lives once they are homeless. Consistent with Chamberlain and MacKenzie’ ‘housing crisis career’, the accumulation of debt when people are already financially disadvantaged can result in people losing their accommodation.¹³⁵ This can be made worse by gambling and drug and alcohol issues.¹³⁶ Preliminary analysis of the Law and Justice Foundation’s Legal Needs Survey 2003 suggests that nearly three times the number of homeless people had experienced credit or debt problems compared with other respondents.¹³⁷ The Interim Evaluation Report of the FHPP found that two-thirds of the 242 families assisted in the project had debts, while only 5% had sufficient funds to cover bonds or emergencies.¹³⁸

Debt also figures in people’s lives once they have become homeless. All the legal clinics supporting homeless people consulted for this study indicated that they commonly assisted homeless clients with debt matters.¹³⁹ For instance, debt was one of the three most common legal problems dealt with by the PIAC/PILCH HPLS in its first six months of operation. When fine matters are added to general debt, then these constituted 15% of the 267 legal problems dealt with in this period.¹⁴⁰ The LCRC submission to the Law and Justice Foundation for the current study noted:

The accumulation of fines, arrears on contract repayments, Centrelink repayments and repayments to pawn brokers mean these clients need someone to advocate on their behalf [to] (i) negotiate and implement a system of payment by instalments or (ii) to reduce amounts being unfairly claimed by creditors.¹⁴¹

Consultations with caseworkers, other stakeholders and homeless people themselves indicated that some of the debts that tipped people into homelessness (e.g. rent arrears), continued to impact on their lives once they have become homeless. Indeed, debt to government agencies including fines, Centrelink-related debt and housing debt were major issues for those consulted. The nature and impact of these types of debt are discussed in greater detail in the relevant sections of this chapter.

Mobile phone debt also was identified as a problem for homeless people by a couple of stakeholders.¹⁴² The LCRC reported that the biggest consumer problem facing its clients related to the charges levied by mobile phone companies when contracts are ended prematurely by customers.¹⁴³

I just stopped the contract, and told them where to put it, and their phone literally. They reckon I owed them $600, but the phone hadn’t been working anyway. They chased me for a while, sent me some letters, but then they stopped. It would cost them more to go to court and get the money out of me anyway.¹⁴⁴

The LCRC submission to this project stated that “many of the clients coming to the LCRC are easy targets for people selling ‘attractive’ ways of life, the mobile phone companies take advantage of those who can least afford contracts”.¹⁴⁵ A caseworker from Newcastle commented that for many people who are homeless, mobile phones provide the only stable point of contact available to them. This is particularly important when people are searching for employment or housing. The mobile phone takes on greater significance when a person’s accommodation may be changing rapidly. This same caseworker observed that homeless people may enter into contracts even if they are aware that they will not be able to make repayments.¹⁴⁶

Debt to banks, particularly from overdrawn accounts, was also raised as an issue of concern. One caseworker referred in particular to difficulties with direct debit facilities. Where a person has arranged to have bills directly debited from their account, and it happens that there are insufficient funds to pay a certain bill, the bank may choose to process the direct debit anyway. If this happens, the bank may charge the person a dishonour fee, an account overdrawn fee, and interest on the overdrawn amount.¹⁴⁷ The total sum of the fees can have a considerable impact.

How the banks let them overdraw I’ve got no idea. They then get charges on their debits which puts them more in debit, and then they get more charges. They never get ahead. I try and tell people to at least leave $5 in their account every month. It’s a big problem with people who are alcoholics.¹⁴⁸

Thus, a common feature of debt and debt repayment for the homeless, irrespective of its source, is that it often compounds, not only making the debt harder to repay but also leaving less funds available for adequate housing.