Author: Anisha Chandrasekar
For every tax-payer euro invested in debt relief services, the estimated returns are more than double of that through gains in welfare and social benefits (Civic Consulting 2013). Taking on board this principle, the Netherlands is one of few countries that hold local authorities to a statutory obligation of providing free debt advice services. However, these provisions go surprisingly underused in Dutch society with only 4,000 of the 30,000 indebted in The Hague using financial counselling as a means of improving their situation (Gemeente Den Haag 2015). The question then turns to why there is an observed resistance.
Stigma around Debt
In many cases, this reluctance stems from the stigmatization of the indebted, referring to the poor perception and societal disapproval towards the group’s circumstance. The commonly held notion of the indebted is that of people who foolishly spend above their means and lack the self-control to manage their finances well (Paul 2018). In reality, studies show the leading cause of over-indebtedness to be unexpected and adverse life changes- such as a divorce or unemployment (Kreander 2018).
Due to its personal nature, the associated shame often prevents individuals from seeking help and its concealment results in depression, anxiety and mental distress (Keene, Cowan and Baker 2015). The way to combat the issue is by erasing stigma and taking away the taboo nature of the subject by breaking misconceptions of debt and its negative portrayal of the indebted. In doing so, we would aim for debt not to become an internalized issue of self-worth but rather an open dialogue on the commonly faced struggles of the current economic climate (NL Times 2019).
A Blind Eye
The second hindrance in seeking assistance comes from the underestimation or misconception about the nature of one’s debt problems. On average, it takes approximately 5 years for households to realize the need for external counselling services, by which point small payments often balloon into much larger debts (NL Times 2019). This lack of understanding concerning finance and difficulties in bureaucracy makes it hard for people to know when and whom to reach out to.
The Importance of Education
This highlights the responsibilities that educational institutions hold in imparting practical skills of financial literacy to the youth (NFEC 2013). Not only will this reduce the stigma associated with debt, but it can also prove to be extremely worthwhile considering the shifting demographics of the indebted to younger ages. In that sense, the best intervention is prevention and equipping individuals with basic financial competency.
Another consideration must be the access of quality debt services for all. While there are many social care providers that aid low-income groups, the problems of indebtedness require a unique skillset of financial and legal knowledge which many lack. Moreover, one study found that although advertised as inclusive, municipality debt services only help people that meet strict criteria and around 150,000 individuals have been turned away on exclusionary grounds (NL Times, 2016). To reduce the individual burden of debt and increase the outreach of counseling services, accessibility and inclusivity must be prioritized in its delivery.
Civic Consulting (2013). “The over-indebtedness of European households: Updated mapping of the situation, nature and causes, effects and initiatives for alleviating its impact.” Civic Consulting. At https://ec.europa.eu/info/sites/info/files/final-report-on-over-indebtedness-of-european-households-synthesis-of-findings_december2013_en.pdf.
Gemeente Den Haag (2015). “Schuldhulpverlening.” Gemeente Den Haag. At https://www.rekenkamerdenhaag.nl/web/file?uuid=574ae4f5-542a-4ff7-aa13-%2055a3b30a598a&owner=1b93e490-1572-4089-8bea-ebd8e28a0bbf.
Keene, D. E., Cowan, S. K., and Baker, A. C. (2015). “‘When you’re in a crisis like that, you don’t want people to know:’ Mortgage strain, stigma, and mental health.” American Journal of Public Health 105(5): 1008-1012.
Kreander, S. (2018). “Drivers of household over-indebtedness and prevention factors: Interviewing financial experts.” International Business Administration and Finance.
NL Times (2016). “Heavily indebted people get little help from cities.” NL Times. At https://nltimes.nl/2015/05/14/research-heavily-indebted-people-get-little-help-cities.
NL Times (2019). “Half-million Dutch households in serious financial trouble; topic too ‘taboo?: Think tank.” NL Times. At https://nltimes.nl/2019/10/22/half-million-dutch-households-serious-financial-trouble-topic-taboo-think-tank.
NFEC (2013). “Financial literacy for students.” National Financial Educators Council. At https://www.financialeducatorscouncil.org/financial-literacy-for-students/
Paul, S. (2018). “Americans are clueless when it comes to personal finance.” New York Post. At https://nypost.com/2018/01/18/americans-are-clueless-when-it-comes-to-personal-finance/.