When Scott Futcher needed help paying his electricity bill and a bond to move house eight years ago, he started looking for a loan.
The now 41-year-old, who lives near the NSW city of Newcastle, recalls turning to Google and searching for payday loans.
He ended up with multiple small loans that left him in about $10,000 debt he was unable to repay.
Initially, he said he was “too proud to ask for help”.
"I knew I was the one who did it. I put myself in there, I should get myself out,” he told Insight.
“In the back of your mind, you’re shaming yourself.”
Scott is not alone in his experience.
According to the latest Australian Bureau of Statistics (ABS) figures, the average household debt grew by 7.3 per cent to $261,492 in 2021-22. Household gross disposable income grew 3.7 per cent to $139,064.
Kristen Hartnett is a financial counsellor, and national manager of the Salvation Army’s Moneycare service. She said shame surrounding debt and financial worries is common, and often one of the first feelings people raise.
“The first thing they’ll say is, ‘I never expected to be here’, ‘I’ve never told anyone about this,’ or ‘I’m embarrassed about the situation I’m in’,” she told Insight.
Kylie Holford, a financial counsellor in central west NSW, agrees.
“I’ve been doing financial counselling for almost nine years, and the majority of clients feel anxious and ashamed about their financial situation if they’ve come in to ask for help,” she said.
What is financial shame?
Ms Holford described the term as the shame people feel about not being able to manage their finances.
“Most Australians are not brought up to talk about their finances,” she said.
“There’s also this underlying notion that we should all just know how to manage our finances. If we don’t, there’s stigma or shame around [that].”
Ms Hartnett said it is common for people to take “enormous responsibility” for the situation they’re in.
“We often see them taking ‘over responsibility’. But really, quite often, they’re in a situation which they have very little control of,” she said, citing a job loss or marriage breakdown.
“We see people blaming themselves - and quite harshly - for that circumstance.”
What is causing financial stress?
Ms Hartnett said people are seeking financial help due to cost of living pressures, housing and an increased number are presenting with experience of domestic and family violence.
Last week, the Reserve Bank of Australia (RBA) , taking it to the highest level since September 2012. It warned more hikes could be on the cards.
The RBA is trying to dampen spending in order to put a lid on inflation, which has risen to 7.8 per cent in the year to December, the highest rise since 1990.
With these pressures, Ms Hartnett said people are turning to easy-access and expensive credit options such as payday loans to get by.
“Once they go down that cycle of accessing payday loans, it's easy to access, difficult to negotiate out of at your own level and the fees can blow out," Ms Hartnett said.
A ‘booming’ payday loan industry
"It was all new to me at the start,” Scott said of his experience with payday loans.
“These payday loans come up and you just start from the top, working your way down, and you start applying.”
Scott was a part-time worker at the time and was receiving Centrelink payments. He was unable to secure a bank loan.
He says the process of applying for such a loan was all online and involved uploading a series of documents such as bank statements and employment checks.
"In my mind, I don't think they did a full check. It was very quick. They would say, 'you've been granted a loan' and the money would be in your account in about an hour's time," he said.
"That's why I got caught up in it all. Instead of trying to find another way of getting money, this was easy and I just kept going."
Scott was initially lent $500, but says he started accessing more money on that loan through "top-up loans".
"More bills are coming in, you think, 'I'll have to get another loan to pay that'. You kind of have to get another loan to pay the other loan off as well, just to keep afloat," he said.
But he couldn't get in front. Scott obtained multiple loans, including seven through one lender.
He says he found himself in about $10,000 debt.
Payday loans are high-cost, fast loans of up to $2,000 that are paid back over a period of 16 days to 12 months, according to a recent report from a national coalition of consumer advocacy groups called ‘Stop the Debt Trap’.
Also known as small-amount credit contracts (SACCs), they can attract significant fees on top of the original loan, with equivalent annual interest rates ranging from 112.1 to 407.6 per cent, the 2019 report says.
“The high-cost payday loan market is a billion-dollar industry in Australia, driving hundreds of thousands of Australians into a debt trap,” it says.
According to the report, around 1.77 million households took out just over 4.7 million payday loans worth approximately $3.09 billion between April 2016 and July 2019.
Those loans generated approximately $550 million in net profit for lenders.
In 2019, the gross amount of payday loans reached $1.7 billion.
Recent research from NAB found payday loans were the third most common type of debt used to manage financial hardship (behind credit cards and borrowing from friends and family) in the third quarter last year. One in 10 Australians facing hardship took out a payday loan in the three months to November.
Payday loans were the most stress-inducing of all debt, ahead of loans from family and friends, personal loans and home loans. On average, Australians owed $6,200 on this type of loan during that time.
Ms Holford said payday loans have “dramatically” increased the number of people seeking financial help.
“Over the last several years, they have really taken flight,” she said.
“What happens with a lot of these payday loans is that, by nature, they haven’t been regulated. There have been no requirements for operators to check that people can afford to pay back the money they’re borrowing.”
Late last year, the federal parliament passed reforms providing enhancements to the national credit laws that apply to payday loans and consumer leases.
Consumer groups welcomed the “long overdue reforms” they say will protect consumers from falling into debt traps.
Ms Holford said the new protections, due to come into effect later this year, will put a cap on how much people can borrow, and ensure payday lenders perform checks on the borrower’s capacity to repay the money.
“The new regulations will hopefully go a long way in protecting some of the most vulnerable,” she said.
What are the impacts of financial shame?
Ms Hartnett said shame around finances can often delay people from seeking help, and “paralyse” them in making decisions in other aspects of their life.
“We often see that if people feel shame about their financial situation, it can be overwhelming and they think they have no competency in other areas, which is clearly not the case,” she said.
“That shame can colour their ability and self-worth … and that impacts relationships and health.”
In 2022, Insight explored how people get into debt and how they are getting out of it.
“People say they can’t sleep, that it’s constantly on their mind … they don’t feel like they can answer the phone, they don’t want to look at emails,” she said.
“To have that constant fear can really adversely affect people’s mental health.”
Scott says his mental health deteriorated through his experience and he started having suicidal thoughts.
“But I started to talk to people about it. And I’m glad I did because it’s worked out better.”
What are some ways to work through it?
After confiding in a friend, Scott was put in touch with the Salvation Army’s Moneycare service.
“That was the first day of getting my life back. It has taken a couple of years now. But I actually see the light at the end of the tunnel,” he said.
The financial counselling service went to the national financial ombudsman on Scott’s behalf over a complaint that a creditor had provided unsuitable loans.
After an agreement was reached to collect only the remaining amount of the original loan - and waive interest and late feeds - Scott made his final repayment last week.
“No more loans. I feel great. I just felt like I wanted to cry again,” he said.
Both Ms Hartnett and Ms Holford encouraged those who are experiencing financial hardship to get in touch with a free financial counselling service for support.
Ms Hartnett said working through hardship involves identifying and accepting what is outside a person's control.
“For example, cost of living is really outside a lot of our control. What is in our control is, where can we make some tweaks in our weekly spend?” she said.
“We do acknowledge that navigating the financial system and landscape can be overwhelming for people when you’re experiencing that high stress.”
Ms Holford encouraged family and friends who might be aware of a loved one’s financial situation to start a conversation with them.
“Listen to them, ask them if they want assistance. And if they do, potentially then just help them to find the right help that they need,” she said.
'There is always a way through'
While Scott continues to manage cost of living pressures, he says he’s living a “reasonably happy life”.
“Back in those days, I wouldn’t have had a roof over my head right now. But now I go to the shops and I just look for the specials,” he said.
“I don't make a fortune, like everyone who is struggling, but without loans, you know where your money is going.”
He encouraged others who might be experiencing financial hardship to seek help as soon as possible.
“There is always a way through,” he said.
Readers seeking crisis support can contact Lifeline on 13 11 14, the Suicide Call Back Service on 1300 659 467 and Kids Helpline on 1800 55 1800 (for young people aged up to 25). More information and support with mental health is available at and on 1300 22 4636.
supports people from culturally and linguistically diverse backgrounds.
People who are experiencing financial hardship can contact the National Debt Helpline on 1800 007 007 for support. More information can be found .
