Up to a third of Aboriginal people in remote towns are being ripped off by financial scams involving funeral pre-payments, pay-day lending or excessive interest rates on loans for household essentials such as a fridge.
Legal Aid NSW has called for the federal government to act on the Financial System Inquiry’s proposal to allow targeted bans of unfair practices.
Legal Aid senior solicitor Jemima McCaughan said salesmen are preying on high infant mortality and youth suicide rates among Aboriginal communities to sell high-cost funeral insurance plans to families to cover their children from a very young age.
“The younger you sign up, the more you will pay,” she said.
“Aboriginal people tend to attend and contribute to more funerals due to social and cultural obligations, and a larger kinship network, so having a way to pay for funerals is important to a lot of Aboriginal people.”
But the contracts can end up costing tens of thousands of dollars.
A Legal Aid program sending solicitors into four communities, Dareton, Lake Cargelligo, Condoblin and Murrin Bridge, to assist 350 Aboriginal families, will be expanded across the state in 2015.
“These issues are so prevalent that in some communities as many as 30 per cent of the population have sought – and received – legal help with these money worries,” said NSW Attorney-General Brad Hazzard.
One Aboriginal elder, John, who lived on the aged pension in a remote town, used a payday lender to pay for his car registration and living expenses after he took temporary care of his grandchildren.
When Legal Aid intervened, John had paid $6500 for $3500 in credit over 18 months, continued to pay $130 a fortnight from his pension and still owed $2500 on the contract.
Legal Aid found the contract breached consumer protection laws, and was able to get $1500 refunded.
Ms McCaughan said Aboriginal people on low incomes are paying a quarter of their wage on consumer leases for a fridge or other essential items because they are excluded from mainstream financial products, and aren’t told the full cost of the contract.
The inquiry has recommended that the financial regulator be able to target bans to conduct relating to certain classes of people. Banning consumer leases from being marketed in Aboriginal communities would prevent families getting into financial difficulty, she said.
“We think a prohibition on unfair trading will fill the gap. What we see is a lot of business models dependent on taking advantage of the vulnerable,” said Ms McCaughan.
Legal Aid has encouraged Aboriginal communities to put up “do not knock” stickers on letter boxes, which is helping, she said.
“There is a real capacity to improve the information people have and share information to strengthen the community. The Koori grapevine works very well.”
The solicitors are raising awareness of No Interest Loan providers.
Superannuation products are also a problem, because the preservation age is often higher than the life expectancy of Aboriginal people.
Aboriginal people have been unable to locate the superannuation of deceased family members, and have difficulty accessing death benefit funds, because of proof of identity requirements.
Low birth registrations, multiple names, and the difficulty of accessing documents from remote communities are hurdles, Legal Aid found.