It’s more common than what you would think… Financial abuse. But what is it exactly? And how can that affect one’s credit report? Financial abuse can severely impact one’s credit score, the adverse effects over time can lead to late repayment reporting (bad RHI’s), default listings, excessive credit enquires, bankruptcy, loss of assets and more.
Financial abuse, also called Economic abuse and occurs when someone uses money or things relating to money to hurt, scare or control their victim. More often than not financial abuse is related to domestic violence and is also classified as a form of domestic abuse. Someone who is financially abusive might also use things you own such as a property or vehicle, to cause problems for you. They will often persuade you and manipulate you to borrow more than what you can afford to furnish a lifestyle that they would not afford on their own, using violence, manipulation and pressure. In many cases, the fear of disbandment and rejection is be stilled on the victim. Financial abuse can be subtle or obvious. Subtle financial abuse could include a someone gradually taking control over bank accounts and financial transactions. More obvious financial abuse can be violent and threatening. For example, someone may forbid their partner from working or from spending their wages on themselves, but ask them to pay for all of the household bills, apply for credit that benefits the perpetrator only. If there is joint loans, borrower’s actions result in credit reporting and default listing of both co- borrowers. There are credit repair options that can be taken in the event of the fallout from financial and domestic abuse, that can be assessed by way of a free no obligation discussion with an advocate from We Fix Credit.
Some examples of financially abusive behaviours include;
- Taking control of someone else’s finances (e.g. being in charge of all the household income and paying the other person an allowance).
- Controlling how all of the household income is spent.
- Making someone go guarantor on a loan or take a loan out in their name or take out credit cards and racking up debt on shared accounts or joint credit cards. .
Joint facilities may include transaction accounts or liabilities such as home loans and personal loans held in the name of two or more borrowers. Each customer will be jointly and severally liable for any debts held in joint names. This means they are each individually responsible for the whole debt and the lender can pursue either of them for the entire amount owing.
- A guarantee is signed under duress, or else the guarantor was misled and did not understand what they were signing.
- One borrower is experiencing financial difficulty and requires hardship assistance, while the other borrower refuses to engage in any hardship discussions.
- Forging a partner’s signature on financial documents.
- Taking money out of a family member’s pension.
- Selling a someone’s possessions without permission.
- Misusing an Enduring Power of Attorney.
- Forcing a family member to change their will.
- Stopping someone from getting a job or going to work.
- Stopping their victim from going to work or important meetings or earning money by keeping them up all night or physically hurting them.
Limiting a their victim’s access to money:
- Not giving their victim access to their own bank accounts.
- Destroying, damaging or stealing property.
- Withholding financial support like child support payments.
- Refusing to work or contribute anything to the household income.
- Gambling away their victim’s money or shared money.
If you identify to any of the above you may qualify for assistance with your lender, to work though your concerns and reach an amicable resolution.
What are the effects of financial abuse?
Financial abuse can have huge effects on a person’s life, that are not just limited to their financial wellbeing, including impacts on their social inclusion, stability of living and physical and mental health. The ramifications of financial abuse are often not spoken about during the relationship, more so it can take years for the victim to try to break away from the relationship wondering how they could ever get out of the terrible financial position they are in. The general consensus amongst my clients that I work with that have been a victim of financial abuse, is that they were promised over and over that they would be paid back or compensated. This keeps them in the relationship for longer hoping that the perpetrator will give them back what they have taken or some of what they have taken so that they will not be in such debt. Financial abuse – along with emotional, physical, and sexual abuse – includes behaviours to intentionally manipulate, intimidate, and threaten the victim in order to entrap that person in the relationship.
Financial abuse can result in large amounts of debt accrued in the person experiencing abuse’s name, which can be accumulated in a number of different ways. For example, debts can be accrued through joint loans or credit cards, loans the abuser forced the victim to apply for, or in some cases loans the abuser forged the victim-survivor’s signature, in this case it is very difficult for the victim to make the necessary police reports against their partner as they usually are in fear of the consequences of such action.
Financial effects are not just limited to debts, financial abuse can also play a large role in a victim’s access to income. For example, if an abuser forces someone to stop working they can become socially isolated and find it extremely difficult to rejoin the workforce. This can result in the victim being left with huge debt and no income to repay. Financial abuse can create an added barrier to leaving an abusive relationship, with survivors being financially dependent on their abuser and not being able to cover costs associated with leaving such as food and living expenses. This means survivors who do leave can end up no having any where to go. When there is children involved this can get rather complex for the victim to even consider to leave or refuse demands.
For those who manage to escape the abuse and survive initially, they often face overwhelming odds in obtaining long-term security and safety. Ruined credit scores, sporadic employment histories, and legal issues caused by the abuse make it extremely difficult to gain independence, safety, and long-term security.
How to gain control…
- Check your credit report.
- Taking inventory of all credit in your name.
- Review bank statements and loan statements to see how much debt you owe and to whom.
Arrange a free consult with We Fix Credit so that we can assess and help you
If you’re worried about your abuser continuing to open new accounts in your name, consider putting an alert on your credit report by contacting the credit reporting bodies.
The good news is that Financial abuse has been identified as a form of domestic abuse and is no longer in the dark. There are guidelines in place which the lenders are also required to adhere to.
In November 2016, the Australian Bankers’ Association (ABA) published an industry guideline on financial abuse and family and domestic violence policies. While not all financial firms are ABA members, this guideline reflects good industry practice. In particular, it is important that staff employed in this department are appropriately trained to understand family violence and financial abuse, and can recognise and respond appropriately to the warning signs of family violence, particularly at the time of lending. This guideline is designed for lenders to take some responsibility when they are lending or consulting to lend. Because of this its always good to write down who you speak to or if it is an existing loan try to remember any information that may assist you if you have some concerns whether or not the lender followed this guideline.
A lender should not accept a customer as a borrower for a credit facility if it is aware that the customer will not benefit from the facility. Examples could include a loan in joint names where only one borrower benefits, a credit card account that is to be used only by the secondary cardholder, or a loan solely in the customer’s name that is obtained for another person’s benefit. If the customer will not benefit from the funds advanced, then they cannot be regarded as a borrower or co-borrower and should instead be treated as a guarantor. Guarantors receive special protection because they do not benefit from the loan.
Where a customer did not benefit from a credit facility, and the lender was or should have been aware of this at the time of lending, it’s expected that they release the customer from liability for the facility. This includes where warning signs of potential financial abuse were present at the time of lending, and a financial firm failed to recognise or act on those warning signs. The customer is not liable for the facility in these circumstances because as a borrower, they would not have been afforded the protections that guarantors are entitled to receive, for example a warning to seek independent advice.
Where a customer only partially benefitted from the funds, then it will usually be appropriate for the lender to release the customer from liability for any portion of the loan which did not benefit them. As one of the warning signs of potential financial abuse is where a borrower receives only a small benefit from a loan, where an lender is aware of this at the time of lending it should ensure it makes further enquiries before approving the loan.
When one borrower on a joint loan is requesting relief under financial hardship…
Lenders are expected to work with an individual borrower who is requesting assistance with a joint loan, and discuss options for resolving their financial difficulty. If there is a suitable variation that would assist an individual borrower, the lender is expected to implement this..
The National Credit Code, the Code of Banking Practice and the Customer Owned Banking Code of Practice all refer to an individual debtor being able to request assistance, including contract changes, where they are experiencing financial difficulty. There is no requirement for a lender to request to come jointly from all borrowers to a loan. As each borrower is both jointly and severally liable to repay the full amount of the loan, it is only fair that each borrower is also individually entitled to ask for assistance if they are having difficulty meeting their obligations. Keep this in mind, as if you feel that you personally cannot afford a loan and are a joint borrower or guarantor, you must contact the lender immediately to notify them of your situation. Having an open and frank discussion with your lender can save a lot of time, costs and heartache down the track.
What if I am already adversely affected on my credit report? Is it too late to seek help?
If you are a victim of financial and domestic abuse, and have a copy your credit reports and identify that there is an adverse listing, then you can attempt to resolve the issue directly with the lender. It is important to have a timeline of your events and chronology noted so that it can be clearly understood what has occurred and when. If you have any police or domestic violence orders, keep a copy available to provide this when making your enquiries. At We Fix Credit, we understand that talking about these issues is a very delicate matter and your privacy and discretion is of utmost priority. You would not have to speak to the lenders, or explain your circumstances over and over, as we would speak and correspond on your behalf until the resolution is sought. In the majority of cases, we can negotiate with the lender to save you money and remove the adverse information from your credit file, essentially increasing your credit score and sorting out the issues one by one. The process is streamlined, confidential and easy.
If you or someone you know may be a victim of domestic violence or financial abuse please seek help with the links below;