Debt can be a powerful tool for control over women

Research by Evgenia Bourova, Professor Ian Ramsay and Professor Paul Ali at Melbourne Law School highlights the challenges that financial counsellors and other consumer advocates face in assisting women with debt problems resulting from economic abuse — an often ‘hidden’ form of family violence. The risk of this type of abuse escalating during and in the wake of the COVID-19 pandemic is high. This article was originally published on Broad Agenda.

Coercing, deceiving or pressuring an intimate partner to take on debt, either solely in her own name or in joint names, is a surprisingly common form of economic abuse.

Once described as a ‘covert’, ‘relatively unknown’ form of family violence, economic abuse is a gendered problem. According to one recent study, 15.7% of Australian women experience it within their lifetimes, compared to 7.1% of men.

The estimated economic cost of family violence against women in Australia totals $21.7 billion per year, the bulk of which is borne by the victims themselves. We have recently published an article in the University of NSW Law Journal drawing on focus groups with financial counsellors, lawyers and other consumer advocates who regularly assist women with debt problems in the context of economic abuse. The focus group participants were employed by community organisations including Consumer Action Law Centre, Good Shepherd Australia New Zealand and WIRE Women’s Information.

The research examined ways in which a perpetrator of economic abuse can use debt to exercise power and control over their partner or former partner.

Our research found that during a relationship, the perpetrator may force their partner to take on liability for car loans, credit cards or mobile phone contracts in her name only, while retaining exclusive use of the asset. They may put contracts for household utilities in her name or, in circumstances known as sexually transmitted debt, pressure her to act as a third party guarantor for business and other loans.

It is also the case that sometimes, following separation, the perpetrator may intentionally accrue debt on credit cards taken out in their former partner’s name, or build up arrears on utility contracts after she has
fled the family home. They may also threaten to default on debts held in the couple’s joint names.

Economic abuse has serious consequences long after the relationship is over. Participants described clients who had fled violent relationships foregoing essentials such as food and heating in order to pay both their own and their former partner’s share of joint debts in an attempt to avoid having a default listing on their credit history.

Participants agreed that ongoing stigma and shame surrounding family violence meant that many of their clients were reluctant to acknowledge their predicament as the result of economic abuse, rather than just ‘the way things are’.

As one case worker expressed it:

"I manage the phone room where we receive calls from women who might even not identify that they’re in a financially abusive situation… When people in the phone room say, “That sounds like financial abuse to me”, the woman on the other end of the phone goes “No, it’s not.” We can’t name it in a way that can be heard easily."

Laws are currently in place to allow Australians in financial hardship to negotiate payment plans and other arrangements with banks, utility companies and other creditors.

In theory, these laws can provide women with debt incurred in the context of economic abuse with a temporary reprieve from debt recovery. In the wake of Victoria’s Royal Commission into Family Violence, these laws were supplemented by industry guidelines recognising economic abuse as a cause of financial hardship and expressing a commitment to better practices in respect of customers facing payment difficulties due to family violence.

However, participants in our research agreed that family violence workers and other community sector workers require greater support in navigating a complex intersection of family law and consumer credit law to ensure that their clients can exercise their legal rights.

Unlike financial counsellors — whose work largely involves assisting clients to resolve debt problems with creditors — other community sector workers may not be aware of the full range of options for women with debts incurred in the context of economic abuse.

Creditors also vary in their willingness to waive debt incurred in the context of a violent relationship, even when it is clear that a client cannot make any repayments for the foreseeable future.

As one participant said:

"The minute you mention the words 'domestic violence', some banks have an understanding and sympathise. Other banks … don’t care if there’s domestic violence or not. They want to know how much they’re going to get and it’s really, really difficult to negotiate with them."

According to participants, the short-term solutions typically made available through creditors’ hardship programs, including moratoriums and three-month payment plans, are of little use to many survivors of family violence whose financial recovery can be a lengthy process. A temporary reprieve from repayments is also an unsatisfactory solution where the debt itself was taken out in circumstances involving pressure, deception or duress.

This research was carried out as part of the Financial Hardship Project, which was funded by an Australian Research Council Discovery grant. More information on this project is available on the Melbourne Law School website here.

This post is part of the Women's Policy Action Tank initiative to analyse government policy using a gendered lens. View our other policy analysis pieces here.

Content moderator: Sue Olney