Collection Agency: Australia?s Youth Facing Debt Stress

Australian consumers are facing debt troubles with young people and those living in outer metropolitan regions in particular showing signs of severe debt stress according to a study from leading credit reporting and collections agency Dun & Bradstreet (D&B).

The debt study provides insight into the pockets of the Australian community that are feeling the greatest impact from rising interest rates and unsustainable levels of debt by revealing trends for geographic locations around Australia in addition to breakdowns by age, gender, and repayment habits.

The D&B March 2008 quarter debt trends data reveals that:

• more than half of all debtors are younger than 35
• more than 60% of consumers are defaulting on low value amounts ($400 or less)
• males have higher average debt values than females and are less likely to repay their bills
• debt stress is most evident in outer metropolitan areas
• NSW and Victoria account for the highest proportions of debt referred for collection.

Dun & Bradstreet CEO Christine Christian believes the impact of high interest rates, fuel and food prices are showing through in the consumer debt study.

“The high cost of items such as food and fuel have been a burden on Australian consumers for some time now,” said Ms Christian. “However recent hikes in food, fuel and interest rates have increased the pressure on many individuals by forcing a larger portion of the weekly wage to be spent on essential items. This pressure is evident in D&B’s debt data, particularly as we have seen an increase in number of low value debts being referred for collection.”

State vs. state
Consumers in the ACT are incurring larger average debt values than any other state or territory. NSW and WA follow with average debt values in these states around nine per cent lower than the ACT. Each of these states increased their average debt values as compared to the December 2007 quarter. Meanwhile NSW and Victorian consumers account for the highest proportions of referred debt, both at around 30%.

Men vs. women
The average value of referred debt for men is some 37% higher than their female counterparts. Men have consistently accounted for higher average debt values than females over the past two years.

Despite the propensity of men to get into trouble over larger amounts, the proportion of debt referred for collection is fairly evenly split between the two genders. This trend has changed since the December 2007 quarter where men accounted for seventy per cent of referred debt.

Sector
The Telecommunications sector accounted for the highest proportion of referred debt at close to 50%, a trend which was also evident in the December 2007 quarter. The sector also saw an increase in the average value of debts referred for collection, rising 14 per cent since the previous quarter. Younger Aussies are incurring higher average values of telecommunications debt and they account for a significant portion of the debt referred for collection, with more than half of the referred debt in the March quarter coming from Aussies younger than 35.

According to Ms Christian it is particularly concerning that young Australians are demonstrating signs of stress and that the number of small debts being referred is increasing. "The fact that more than half of all debtors are younger than 35 is a sign that this group in particular are experiencing significant debt stress. Young people need to ensure they pay close attention to the management of all their debts to avoid their debt burden from spiralling out of control.

“The increase in low-value debts being referred is also worrying. Defaulting on a $400 bill demonstrates that consumers are in very serious trouble or that they don’t fully understand the consequences of missing payments,” said Ms Christian.

The study’s findings are consistent with D&B’s latest Consumer Credit Expectations Survey.

Examining expectations for the June quarter, the survey found that more than one in five Australians’ expect to use their credit card to finance purchases they otherwise couldn’t afford. This figure jumps to twenty-eight per cent for Australian’s aged eighteen to thirty-four. In addition, around one in ten young people expect to miss a bill repayment in the June quarter.