External debt collectors will no longer be used by the Albanese government as part of a pledge to ensure robodebt never happens again, the government services minister, Bill Shorten, has said.
Shorten announced on Thursday that all debt recovery will be done in-house through Services Australia, to spare welfare recipients the “unfettered cruelty” unleashed by the former Coalition government.
After current contracts expire on 30 June the government will no longer use external debt collection agents ARL Collect, Milton Graham/Recoveries Corporation and Probe Operations to pursue alleged debts.
The Coalition’s robodebt program, subject of a royal commission due to report by the end of June, used automated debt notices and fortnightly income averaging to calculate alleged debts.
The government was forced to pay out $1.8bn in refunds to welfare recipients after conceding in a class action that income averaging was not a lawful basis to assert a debt.
Guardian Australia revealed in 2017 that the robodebt program resulted in an increase in the use of external debt collection agencies, with almost half of debts pursued in this way.
Contracts worth millions of dollars included penalties on debt collection agencies if they didn’t claw back enough money, in a move that “appalled” critics.
Despite the expansion of external collection, the majority of Centrelink debts were recovered through Services Australia’s own activities. Debt collectors recovered $105m of the $1.75bn clawed back in 2019-20.
The robodebt program was effectively junked in November 2019. But in 2021 Guardian Australia revealed that nearly 1,000 robodebt victims had their debts sent to an external debt collector even after the government had admitted in court that the program was unlawful.
Shorten said people affected by robodebt were “often very vulnerable Australians, people who have gotten on government payments in the first place because they are at a vulnerable time in their lives”.
“We have to stop giving their information to private companies and ensure the debt recovery process is lawful, fair and transparent,” he said in a statement.
“The royal commission into robodebt has put on full display the unfettered cruelty with which debt collection agencies were unleashed against vulnerable Australians. We cannot let this happen again.”
Shorten accepted that debt collection will be required in future due to “opportunistic behaviour” from some people claiming government payments, but said that “Services Australia is already fully capable of recovering debts and has multiple tools at hand”.
“However, the power to raise lawful debts against citizens needs to be exercised judiciously and at every stage afford citizens the right of reply and not reverse the onus of proof from the government to the individual.
“Government should never start from the position that the existence of an alleged debt means the citizen is guilty until proven innocent.”
Shorten said that Services Australia will contact those with outstanding debts to transition them to a new process, offering flexible repayment options, short-term counselling, information and referrals to support systems.
