Listen to how Keith John recommends you deal with debt stress on the 6PR Perth Money News

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[Karalee] Now, it's been almost a week since the RBA board

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increased its cash rate target by another 25 basis points to 4.1%.

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We're all affected in some way and looking ahead, a lot of economists

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believe that the central banks’ run rate hikes still may not be done yet.

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I'm really delighted to welcome to the show tonight

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because as I said, we've almost had a week for this to sink in,

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somebody who's at the coalface dealing with people

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that are really grappling with this sudden interest rate rise.

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And that gentleman is a good friend of the show,

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his name is Keith John,

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he is managing director of Pioneer Credit.

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Keith, good evening.

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[Keith] Good evening Karalee, lovely to be with you again.

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[Karalee] Well, it's lovely to have you on the show.

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As I said, I wanted to bring you on.

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We spoke a few months ago about what Pioneer Credit does.

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I'd like you to just refresh our audience’s mind and you're really sort of here to help

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and to provide what I call a smorgasbord of some options

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for people that really, this is the straw that has broken

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the camel's back for them as to whether they can't make repayments,

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whether it's for a house mortgage

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or it's a boat or it's a caravan or whatever it might be.

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So I wanted you to just say a few words about Pioneer Credit

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and then I'll get into asking you some questions.

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[Keith] For sure, thank you.

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Yeah, so Pioneer Credit specialize in buying

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underperforming loans off the bank.

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So generally credit cards and personal loans.

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And we buy the ones that people are struggling to pay.

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And the reason the banks sell them to us is our specialty is working with people

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and helping them get through the problems that they might have

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servicing those particular loans. So that's our specialty.

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[Karalee] So as we say, you know, a lot of market pundits, a lot of the economists,

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they're still expecting higher interest rates.

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Some people are saying there may be a pause in

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July that it might raise again– rise again, sorry, in August.

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But either way, you know, the expectations of ongoing high inflation

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are going to contribute to larger increases in both prices and wages.

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You're at the coalface, as I said.

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How are households reacting to the mounting cost

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of living challenges, especially here in Perth, Western Australia?

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[Keith] Yeah, I mean, look clearly it's getting very tough for households.

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We deal with about 250,000 customers across Australia.

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So it's a really broad cross-section of people and

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and about 10% of those; 25,000 people are based in Western Australia.

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You know, the conversation has shifted.

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People are very concerned about the cost of living,

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they’re changing the way they live, they’re changing the way they eat.

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And these are things that, you know, in our society we shouldn't be dealing with.

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We don't we don't necessarily

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need to be dealing with them, but we are where we are.

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So, you know, the conversations that we're having with our customers

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now very much about how can I manage my finances, how can I get ahead,

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how can I stop the stress on my family and how do I deal with my children?

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Because they can see that things are changing.

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And that's a very stressful time for, you know,

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for particularly for young families as they're looking to get ahead in life.

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[Karalee] So let me ask you,

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how can householders actually protect their credit scores?

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And a lot of people don't realize

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that everything they do affects a credit score until actually something happens.

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Tell us what your company does and your tips for people.

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[Keith] Yeah, look, I think that the– our natural reaction is,

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when things get tough, is we hunker down and we sort of put our head in the sand.

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And– and that's universal.

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I think we all deal with that or deal with things that way.

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At some point in our life.

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The most important thing when dealing with financial

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pressures is to make sure you talk to someone about it.

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You know, at Pioneer Credit, or just the same with any other lender,

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they're there to help you.

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We all still have our obligations and the advice

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might not be the advice you want to hear, which is you don't have to pay anything,

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but invariably, if you can pay something,you'll keep your credit score

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going along nicely and you'll actually feel better

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and help yourself through a situation that is difficult.

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And that's the main thing, it’s the number one tip; is be honest

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with yourself and start speaking to your lender and talk to them about

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how can we get through this together?

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Your lender doesn't want you to default.

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[Karalee] Ok.
[Keith] Just like you don’t want to default, it’s an important thing.

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[Karalee] And that's really important.

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What I was going to say to you is, look you know, we all crunched the numbers.

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We crunch the numbers on the Money News program here and of course, on our sister stations

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in the Eastern States that we know with this 4.1% rise,

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we know that, you know, mortgages will rise.

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So let's break it down here in WA.

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If you've got somebody that, you know, suddenly they're having to pay $1,000

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a month that they weren't having to

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and they can't afford that $1000 a month, is it literally

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a question of when you come knocking at the door saying, listen,

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there's no way I can do that $1000, I can't even do $400,

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but I can perhaps do $100.

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You've said, of course, that lenders don't want people to default.

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Is it a matter of somebody saying to one of your

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you know, one of your employees, look, I know

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I have to pay $1,000 a month, but I really can only afford $100.

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Is that acceptable or can, you know, do you work with them

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and go through a budget; try and really help them?

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[Keith] Yeah, very much so.

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I mean, we would– we would– it's the best that someone can afford

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is $100, then certainly that's acceptable.

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But from our perspective, what we would do is exactly what you said;

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work through a budget with you,

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try and understand your expenses,

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try and understand your income

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so they're all on the same page and that we're actually getting ahead.

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The other part is, is what we don't want and likewise what any of your lenders don't want is

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if the best you can afford is $90, we don't want to commit them for $100.

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That doesn't make any sense for you because it's going to put

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you under more pressure and it makes no sense for us because,

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you know, our business is best served helping you

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not trying to chase you down for a payment that– a commitment that

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you made that you couldn't actually commit to in the first place.

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So working through those situations and if things are even tougher than that,

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there are a broad range of financial counselors

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and services available where people can go and get free, independent

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advice and address all of their problems at that time.

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So we can point people in the right direction

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so they're getting the right service at the right time and– and it's all free.

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[Karalee] As you mentioned Keith, 250,000 customers across Australia, you deal with,

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thousands and thousands of them here in Western Australia.

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What's the correlation between the tightening cost of living pressures and

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the supply of purchased debt portfolios that pioneer Credit ends up acquiring?

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Yeah, I mean, sadly we're– we're getting busier and busier,

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you know, it's taken a while for the interest rates to move

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through the system and I think there's been a lot of commentary about that.

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But we're now starting to see it.

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So since January this year, the supply has increased and it's increasing

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quite dramatically now, mainly across personal loans and credit cards.

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And what we're seeing on the other side of that is people's ability

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to pay is coming down.

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So since January this year, the average payment

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that we've received is about 3% less than what we were receiving before.

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So a marked tightening in the amount that people can afford to pay,

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and you'd expect that because things are tight and costs are more

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and more supply so more debts.

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We're working with more customers all of the time.

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And we expect to see that go on for quite some time yet Karalee.

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[Karalee] Okay, Keith, last couple of questions before I let you go this evening.

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How does Pioneer Credit finance its debt ledger acquisitions

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in this higher interest rate environment?

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Because as we know, you know, the rates will go higher.

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[Keith] Yeah, so, I mean, look, we're we're like the consumers

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that, you know, your– your listeners on the– on the call tonight.

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We use that in our business as well.

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So we've got higher costs,

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but we finance our portfolio partly through debt

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and partly through the equity that's in our– in our business.

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But just like everyone, managing costs is a really important

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part of our business and, you know, we need to balance that in our business

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against also the expectations of the people that– that work for us.

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They're doing an incredibly important job and one that's quite stressful and rewarding.

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That's, you know, an important part of what we're working through

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now in our business as we go as we come into a new financial year.

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[Karalee] Keith you lead a business that operates, as I said, the coalface

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of the interaction between household sector borrowers and lenders.

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Dr. Philip Lowe copped a bit last week when he suggested that people

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may want to find another job or work extra hours, etc.

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Can I just grab your insight

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into the importance of job availability and wage increases?

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[Keith] Yeah, for sure.

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I mean the–

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the great thing about the current environment is that there are jobs around

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and that everyone that wants a job pretty much has a job now.

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I mean, I sincerely hope that remains the case,

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because that gives you the ability to, of course, meet your commitments

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or at least start addressing your commitments.

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And once these times have passed,

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and then, you know, people will be able to pay down their–

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pay down their indebtedness,

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you know, it's a very tough period, obviously.

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I'm not sure having a second job is the right option

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for so many people.
[Karalee] Neither am I. Neither is anyone.

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[Keith] Yeah. And, you know, we– we've still got families

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and we've still got all of those things that go into making a life.

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And– and you know, I've gradually sort of lamented that

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I wish that they would come and talk to some of our customers

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just to see what it's really like.

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You know, our customers aren’t angry or don't want to yell at people,

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they just need to be understood.

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But it's

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But it’s– it's a really important part of their life
that- that obviously is their work.

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And fortunately, we've still got lots of jobs around.

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So that's a– that's a positive for the current environment.

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[Karalee] Keith, I'll give you the last word tonight.

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If Pioneer Credit comes knocking on somebody's door, well in a– metaphorically

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speaking, you actually ring it and deal with it that way.

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What is your advice to people?

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[Keith] Yeah, our advice to people is talk, be open, be honest,

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and we'll be the same with you as with all of the lenders are nowadays,

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and– and we'll work through a solution together.

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You know, if you can't– if you don't have the money today,

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we'll work through that together until a time that you do,

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but what you will have is peace of mind and hopefully,

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you'll remove some stress from your own life

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because, you know that you're dealing with the situation that's causing it.

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And that's a really important thing for you and your family.

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[Karalee] Keith John,

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managing director of Pioneer Credit,

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thank you very much for your time this evening.

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[Keith] Oh, a pleasure, Karalee.