No abstract

Consumers in Australia and other developed countries are increasingly required to interact with providers of complex financial products and services, and to estimate, mitigate or absorb the risks that flow from their financial decisions. A range of debt-related problems in Australia have been attributed to low levels of financial literacy in the population. However, there has been limited research exploring the relationship between low financial literacy and the problem of financial hardship, where a consumer takes on payment obligations under a contract, but then becomes unable to meet them when they fall due. Drawing on a survey of Australians who recently experienced debt problems, this article examines the impact of financial literacy levels and levels of confidence in managing day-today spending on severity of financial hardship. The article also examines the impacts of financial literacy and confidence levels on the strategies employed to get by financially while in debt. The article shows that while there is no straightforward relationship between low financial literacy and severity of financial hardship, lower levels of financial literacy may reduce consumers' ability to avoid some of the more serious consequences of default, particularly if coupled with overconfidence about their ability to manage spending.

No abstract

Th e Financial Ombudsman Service ( FOS ) was established in 2008 to resolve disputes between Australian consumers and fi nancial service providers. Th is article outlines the role of FOS in resolving disputes under the statutory protections for Australians in fi nancial hardship.Th is article also sets out the results of a study of data collected by FOS in relation to fi nancial hardship disputes resolved between 2010 and 2014. Th is data highlights the importance of FOS in a context where most disputes are resolved outside the courts, particularly in the aftermath of the global fi nancial crisis, when the number of fi nancial hardship disputes rose signifi cantly.