DESPERATE West Australians are turning to expensive payday lenders to keep the lights and heat on.
The number of WA calls to the National Debt Helpline spiked more than 20 per cent to 25,287 last financial year, and there were a further 23,426 requests for advice in the 11 months to the end of May.
The service is now dealing with more than 60 pleas for advice a day and Financial Counsellors Association of WA chief executive Bev Jowle said there was a marked rise in callers faced with spiralling debt after taking out payday loans to pay utility bills.
Electricity prices have jumped about 17.9 per cent in the past two years.
Ms Jowle said changes to the hardship utilities grant scheme (HUGS), including a new requirement to first spend at least 180 days on a payment plan and the exclusion of debts of less than $300, had compounded problems for low-income earners.
“Previously a family with an electricity bill of $800 could have knocked off $400 through HUGS and paid the rest through a payment plan,” she said.
“Now that same family has to go on an $800 payment plan and if they default twice they get disconnected.”
Faced with the prospect of losing power or heat, some people are turning to payday lenders.
Companies like Nimble charge a 20 per cent fee on cash loans of up to $2000, followed by 4 per cent interest on the principal amount — not the outstanding balance — every month.
Midlas financial counsellor Siobhan Meerman said even financially literate people who recognised the dangers fell victim to the allure of fast cash when desperate.
“I’ve spoken to a client with her own mortgaged home and a tenanted investment property who had an unexpectedly high power bill followed by a car repair bill, council rates and a busted water heater,” Ms Meerman said.
“Suddenly she was $6000 in arrears on her mortgage and juggling four or five payday lending bills.”
Treasurer Ben Wyatt said the McGowan Government had committed $7.4 million to reinstate free financial counselling services and topped up funding for HUGS by $5 million in December.
“The Government changes to the HUGS ensure financial assistance is targeted to those with the greatest need, the intention being that HUGS grants be available when utilities have exhausted all other avenues to assist their customers,” he said.
Nimble did not respond to a request for comment.