More people used credit counseling for the first time in 2023

During the consultations, victims were on average 55,000 euros in the red. By 2023 the number of sufferers who attributed their excessive debt burden to increased living and housing costs had doubled.

Last year, in 2023, significantly more people will need to turn to credit counseling for the first time. The number of so-called first contacts increased by 17 percent in 2022 compared to the previous year. One of the main causes of inflation is inflation: As the “Debt Report 2024” shows, in 2023 the number of sufferers who cited rising living and housing costs as the reason for their high debt doubled.

In 2023, a total of 21,600 people in this country used a credit counseling center for the first time. “Across Austria, this is the highest value in the last 12 years, and in the individual federal states it is the highest ever,” said Clemens Mitterlehner, executive director of the umbrella organization ASB Schuldnerberatungen, at a press conference. Monday.

Job loss and income decline

The most common reason for over-indebtedness in 2023 was job loss or a decline in income, which became a problem for 32 percent of sufferers last year. About one-fifth of victims report having been self-employed before, with 18 percent citing a lack of money-handling or financial education. The increased cost of living and housing costs are one reason for the 12 percent higher debt, which is significantly higher than in 2022 (5 percent). With inflation playing an increasingly important role, Mitterlehner said, “customers are reporting they can no longer afford to live.”

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Mitterlehner explained that the majority of people who come to the debt counseling center have very low incomes, which in one-third of cases are currently below the subsistence level of 1,217 euros per month. At the same time, more people cannot afford personal bankruptcy. On average, victims are in debt of around 55,000 euros, compared to around 103,000 euros for those who were previously self-employed.

Structural causes

“Debt is not just caused by individual mistakes, but has structural causes,” said Social Affairs Minister Johannes Rauch (Greens). So he has also called for structural measures to combat excessive debt. These include a reform of the minimum income, a review of unemployment benefits and emergency aid, a cap on debt collection costs, basic child protection and improved data on over-indebtedness in Austria. Rauch noted tough negotiations with the black coalition partner: “Reform of the social welfare law, towards a minimum security worthy of the name, is currently not possible with the ÖVP.”

In fact, there is currently no concrete data on the total number of people in debt in Austria. Together with Statistics Austria, these and other gaps are to be closed in the future, enabling data on implementation activities to be linked to administrative data. “Eight to 9,000 people go bankrupt every year, but we know that there are significantly more people in high debt, but not exactly how many,” Mitterlehner said.

Increase unemployment benefits

Debt counseling also sees the need for political action. It should increase the net exchange rate for unemployment benefits to 70 percent of the last receipt, an increase in the minimum subsistence level and better consumer protection, for example when promoting consumer loans. Mitterlehner also criticized the “explosion of claim amounts”. High debt is compounded by interest, compound interest, court costs and debt collection costs. Hence credit counseling is required to ensure that loans are not sanctioned more than twice. There is also a risk that bankruptcy law will be tightened, and Mitterlehner has called for the option of a 3-year debt relief to be kept in perpetuity. (APA)

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