The government’s Centrepay debit system has been abused by “unscrupulous” businesses to take welfare money from dead Australians and Indigenous women fleeing domestic violence, advocacy groups claim.
The government last month announced a major review of Centrepay, an automated debit system designed to give businesses early access to a person’s welfare money to ensure they can afford essential services such as rent and healthcare.
The review followed a Guardian Australia investigation that revealed deep flaws that had allowed major energy retailers to wrongly take money from the welfare payments of former customers, and given predatory rent-to-buy home appliance companies the ability to massively overcharge individuals living in remote Indigenous communities.
Submissions to the review from Economic Justice Australia and the Financial Rights Legal Centre have warned the government of shocking examples of Centrepay abuse and systemic flaws preventing clients stopping their deductions and leaving them unable to pay for essentials.
In one case, Economic Justice Australia says a business was allowed to continue making deductions for months after a woman had passed away, while her family were still dealing with her estate.
“When the legal service advocated on behalf of their client to end these Centrepay arrangements, the payee business refused to acknowledge they had received the money after the client’s relative’s death,” the EJA said. “The legal service engaged in lengthy advocacy including letters of demand to the business. It was months until the business agreed to refund the overpayment.”
In another case, the EJA said it had also had reports of women in remote Indigenous communities entering into Centrepay arrangements with a transport company to access a bus to flee family violence.
Lawyers at a First Nations women’s legal service told the EJA their clients were told the deductions would continue indefinitely.
“The clients couldn’t check, change or stop these arrangements – they didn’t have the phone, access to phone credit to call and wait on hold to check their Centrepay,” the EJA said. “These arrangements led their clients to not having enough money to afford essentials.”
Advocates have been warning the government of problems with the Centrepay system for years. The corporate regulator, Asic, has also repeatedly warned the government that predatory businesses are misusing the system, but say their warnings failed to prompt any action.
The EJA warned there are still “too many Centrepay users suffering harm as a result of being locked into unsuitable payment deductions”.
“Businesses continue to engage in predatory practices and exploitation using Centrepay,” the EJA warned. “This is particularly prolific in regional, rural and remote communities where ‘rent to buy’ arrangements, often in breach of consumer credit laws, are still the norm rather than the exception.”
The body recommended prohibiting never-ending deductions, as well as a mechanism to alert users if deductions exceed a certain percentage of their payments, and the protection of 25% of a person’s income from Centrepay deductions. It also recommended stronger enforcement, greater transparency about Centrepay deduction details, and more Centrepay support for First Nations and culturally and linguistically diverse communities.
The Financial Rights Legal Centre described failings of Centrepay as an “embarrassment”, and a “national shame” that the government can facilitate an arrangement whereby people on very low incomes are paying up to five or more times the retail price for goods.
The centre called for greater enforcement of Centrepay rules and quick and decisive action for those found to have breached them.
“Historically the system has been used by some providers to extract millions of dollars in profits for poor value services that people could ill afford,” the FRLC said. “This is a privilege that should not be given lightly. There must also be repercussions and mechanisms for enforcement when businesses breach these requirements and objectives, and the capacity to take quick and decisive action to prevent further harm and create a public deterrent.”
The centre said that the use of Centrepay by rent-to-buy appliance companies to prey on vulnerable communities was unacceptable.
“The rip-offs occurring in these communities via consumer leases are appalling and need to be prevented,” it said. “It is a matter of national shame that the government can facilitate an arrangement whereby people on very low incomes are paying up to five or more times the retail price. The above measures should be introduced as a minimum.”
Payday lenders and debt collectors should be excluded from the system, and utilities companies should not be able to sell “high-cost products like top range phones and portable devices, solar panels” via Centrepay.
“In both cases (telecommunications devices and solar panels) we see egregious cases of systemic mis-selling,” the FRLC said.
