Christopher Knaus and Lorena Allam
Fri, 2 August 2024
THE GUARDIAN UIK
Labor deserves credit for acting on Centrepay in contrast to the robodebt scandal when Centrelink and the Coalition refused to even countenance the criticism.
Composite: Guardian Design
In the months since the government announced it would overhaul its controversial Centrepay debit system, one thing has become abundantly clear.
Many already knew it was failing.
Those working with those using the government-run debit system, particularly those in remote parts of the country, knew Centrepay was capable of facilitating shocking financial exploitation of the nation’s most vulnerable.
Regulators and watchdogs knew. Financial advocates and community lawyers knew.
There was no shortage of voices screaming into the tin ear of government.
Related: Consumer watchdog urges crackdown on businesses using Centrepay to cause financial harm
The corporate regulator, the Australian Securities and Investments Commission, has directly warned Services Australia that predatory businesses, many of whom had become Asic investigation targets, were continuing to use Centrepay to exploit welfare recipients.
The consumer watchdog, the Australian Competition and Consumer Commission, has been hearing complaints “for many years” via its Consumer Consultative Committee regarding “the conduct of some Centrepay businesses and the ability of Services Australia to manage poor conduct”.
The Australian Energy Regulator even launched a major prosecution of energy giant AGL over its use of Centrepay to continue taking welfare money from hundreds of customers who had departed as customers years earlier. Even that failed to prompt further audits of AGL’s use of the system. The company is defending the case, saying it cannot be held to have unlawfully overcharged the welfare recipients because it never directly asked for the payments.
It wasn’t until Guardian Australia exposed shocking Centrepay-enabled financial exploitation that the government finally announced its intention for “fundamental” reform. The government said it had been conducting “priority work” on Centrepay reform behind the scenes earlier, but nothing concrete was announced until months after Guardian Australia’s investigation was published.
The situation poses a difficult question about the formulation and improvement of public policy in this country.
Why does it take a concerted media effort to force government to act on something it has long known was a problem?
Centrepay was established in 1998 under the Howard government as a voluntary bill-paying service for people receiving Centrelink payments to make automatic deductions for essentials like rent and utilities.
It currently has more than 620,000 users. A large percentage of them are receiving disability support payments. Almost a third are Aboriginal people, predominantly women, from remote areas, receiving jobseeker or parenting payments.
Over time Centrepay has expanded to include a range of businesses and services.
There are now more than 15,000 companies approved to access Centrepay, which facilitated 23.7 million transactions last year worth $2.7bn. Each transaction incurs a 99c fee, paid to the government by businesses using the system.
Over the past decade, consumer advocates have raised concerns that several of the businesses registered to access Centrepay may be causing financial harm to vulnerable customers.
The corporate regulator is investigating dozens of companies. At least four that it has already penalised remain on the system.
In May 2024, the government announced a full review of the system to increase compliance, transparency and strengthen auditing processes.
Services Australia, which operates the system, says it is working towards improving delivery.
In 2022-23, contracts ended for 12 Centrepay businesses due to non-compliance.
Let’s take a step back. Many readers would not have heard of Centrepay before the Guardian’s investigation in February.
But it is not some fringe system.
Centrepay is used widely. About 600,000 welfare recipients are currently using it to make payments to 15,000 businesses.
The system was designed with good intent. It was created as a budgeting tool, allowing welfare recipients to ensure they can pay for their essentials – rent, energy bills and healthcare costs – before their payments are chewed up by other living costs.
In practice, it operates in a similar way to direct debit.
The critical difference is that the system takes money directly from a person’s welfare payment before it hits their bank account.
The money goes straight from the government’s coffers to the business.
Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundup
If implemented as intended, it remains sensible policy and a useful tool.
Centrepay is not operating as intended.
The problems are glaring and numerous. The rules around the system’s use remain completely inadequate.
Businesses are allowed, for example, to take 100% of a person’s welfare payment.
Even the more sensible rules governing Centrepay use are not being widely enforced.
In 2022-23, Services Australia investigated just 4% of businesses on Centrepay for compliance. From that small pool, staggering rates of non-compliance were found.
About 42% of the 382 government-approved businesses were found to be breaching the rules.
Some non-compliance is minor. Some is shocking.
Guardian Australia has identified three major energy retailers – AGL, Ergon Energy and Origin – who are accused of using Centrepay to continue taking money from the welfare payments of departed customers.
Origin alone has been accused of wrongly taking $2.5m from the welfare payments of nearly 3,000 ex-customers. AGL is accused of taking $700,000 from the welfare payments of about 575 vulnerable Australians after they ceased being AGL customers, an average of $1,233 from each individual’s welfare payments.
AGL denied it had authority to control deductions via Centrepay but said it took immediate steps to “remediate the issue” once it became aware of overpayments. Origin said it “proactively reported these issues to Services Australia”. Ergon said it had “robust” billing processes in place and quickly acts to refund any overpayments.
But the problems go beyond alleged non-compliance by companies that have a legitimate claim to be on Centrepay. The government is allowing businesses access to Centrepay that, clearly, should not have been allowed anywhere near the system.
Related: ‘I had no access’: ex-residents of controversial rehab centre say welfare payments were taken against their wishes
Earlier this year, the Guardian spoke with residents at an extreme Christian drug and alcohol rehabilitation centre named Esther House who said they felt forced to sign up to Centrepay.
Centrepay allowed the service to prop itself up with a guaranteed source of income, straight from the government, while it allegedly conducted gay conversion practices, exorcisms and forced baptisms, and subjected residents to psychological and emotional abuse.
In remote Indigenous communities, the Guardian has revealed how Centrepay allowed a rent-to-buy business to charge a single mother of five $6,500 for a TV worth $1,400.
The revelations should shock the public. But they shouldn’t shock government.
Financial advocates and community legal centres have been airing similar complaints for years. Louise Pratt, a Labor senator, has unflinchingly pursued Centrepay’s failings for years.
Yet it was only in May, after Guardian Australia’s pursuit of the matter, that the government announced a reform process.
Services Australia now appears to be genuinely engaging in a thorough consultation process, which includes meeting with affected welfare recipients and listening to stakeholders, to properly inform future Centrepay reforms.
The government deserves credit for acting, even belatedly.
Anyone paying attention will see obvious parallels to robodebt.
But there is a key difference apparent only to close observers of both scandals.
Related: Centrepay scandal: Labor to reform debit scheme to combat ‘predatory behaviour’
When Guardian Australia first revealed the deep flaws with robodebt and its unfettered reliance on income averaging in late 2016, the reporting was met with steadfast obstinance and denial.
The then leaders of Centrelink and their Coalition portfolio ministers refused to even countenance the criticism.
They rubbished media reporting and leaked against critics.
It took years to force the government to confront the obvious problems with the system.
When asked how the culture at Services Australia had changed recently, the new chief executive, David Hazlehurst, pointed to his agency’s handling of the Centrepay criticism.
“We’ve really adopted a very open approach to engaging with stakeholders on that,” he told Senate estimates in June. “We’re not seeking to come up with all the answers and polish them within an inch of or lives and then consult. We’re actually seeking to engage with people early.”
“Early” may seem a stretch to many who have been complaining about Centrepay for years.
But, at this early stage at least, the stark contrast between its handling of this and robodebt offers some hope of improvement.
Let’s hope the optimism is not misplaced.
In the months since the government announced it would overhaul its controversial Centrepay debit system, one thing has become abundantly clear.
Many already knew it was failing.
Those working with those using the government-run debit system, particularly those in remote parts of the country, knew Centrepay was capable of facilitating shocking financial exploitation of the nation’s most vulnerable.
Regulators and watchdogs knew. Financial advocates and community lawyers knew.
There was no shortage of voices screaming into the tin ear of government.
Related: Consumer watchdog urges crackdown on businesses using Centrepay to cause financial harm
The corporate regulator, the Australian Securities and Investments Commission, has directly warned Services Australia that predatory businesses, many of whom had become Asic investigation targets, were continuing to use Centrepay to exploit welfare recipients.
The consumer watchdog, the Australian Competition and Consumer Commission, has been hearing complaints “for many years” via its Consumer Consultative Committee regarding “the conduct of some Centrepay businesses and the ability of Services Australia to manage poor conduct”.
The Australian Energy Regulator even launched a major prosecution of energy giant AGL over its use of Centrepay to continue taking welfare money from hundreds of customers who had departed as customers years earlier. Even that failed to prompt further audits of AGL’s use of the system. The company is defending the case, saying it cannot be held to have unlawfully overcharged the welfare recipients because it never directly asked for the payments.
It wasn’t until Guardian Australia exposed shocking Centrepay-enabled financial exploitation that the government finally announced its intention for “fundamental” reform. The government said it had been conducting “priority work” on Centrepay reform behind the scenes earlier, but nothing concrete was announced until months after Guardian Australia’s investigation was published.
The situation poses a difficult question about the formulation and improvement of public policy in this country.
Why does it take a concerted media effort to force government to act on something it has long known was a problem?
Centrepay was established in 1998 under the Howard government as a voluntary bill-paying service for people receiving Centrelink payments to make automatic deductions for essentials like rent and utilities.
It currently has more than 620,000 users. A large percentage of them are receiving disability support payments. Almost a third are Aboriginal people, predominantly women, from remote areas, receiving jobseeker or parenting payments.
Over time Centrepay has expanded to include a range of businesses and services.
There are now more than 15,000 companies approved to access Centrepay, which facilitated 23.7 million transactions last year worth $2.7bn. Each transaction incurs a 99c fee, paid to the government by businesses using the system.
Over the past decade, consumer advocates have raised concerns that several of the businesses registered to access Centrepay may be causing financial harm to vulnerable customers.
The corporate regulator is investigating dozens of companies. At least four that it has already penalised remain on the system.
In May 2024, the government announced a full review of the system to increase compliance, transparency and strengthen auditing processes.
Services Australia, which operates the system, says it is working towards improving delivery.
In 2022-23, contracts ended for 12 Centrepay businesses due to non-compliance.
Let’s take a step back. Many readers would not have heard of Centrepay before the Guardian’s investigation in February.
But it is not some fringe system.
Centrepay is used widely. About 600,000 welfare recipients are currently using it to make payments to 15,000 businesses.
The system was designed with good intent. It was created as a budgeting tool, allowing welfare recipients to ensure they can pay for their essentials – rent, energy bills and healthcare costs – before their payments are chewed up by other living costs.
In practice, it operates in a similar way to direct debit.
The critical difference is that the system takes money directly from a person’s welfare payment before it hits their bank account.
The money goes straight from the government’s coffers to the business.
Sign up for Guardian Australia’s free morning and afternoon email newsletters for your daily news roundup
If implemented as intended, it remains sensible policy and a useful tool.
Centrepay is not operating as intended.
The problems are glaring and numerous. The rules around the system’s use remain completely inadequate.
Businesses are allowed, for example, to take 100% of a person’s welfare payment.
Even the more sensible rules governing Centrepay use are not being widely enforced.
In 2022-23, Services Australia investigated just 4% of businesses on Centrepay for compliance. From that small pool, staggering rates of non-compliance were found.
About 42% of the 382 government-approved businesses were found to be breaching the rules.
Some non-compliance is minor. Some is shocking.
Guardian Australia has identified three major energy retailers – AGL, Ergon Energy and Origin – who are accused of using Centrepay to continue taking money from the welfare payments of departed customers.
Origin alone has been accused of wrongly taking $2.5m from the welfare payments of nearly 3,000 ex-customers. AGL is accused of taking $700,000 from the welfare payments of about 575 vulnerable Australians after they ceased being AGL customers, an average of $1,233 from each individual’s welfare payments.
AGL denied it had authority to control deductions via Centrepay but said it took immediate steps to “remediate the issue” once it became aware of overpayments. Origin said it “proactively reported these issues to Services Australia”. Ergon said it had “robust” billing processes in place and quickly acts to refund any overpayments.
But the problems go beyond alleged non-compliance by companies that have a legitimate claim to be on Centrepay. The government is allowing businesses access to Centrepay that, clearly, should not have been allowed anywhere near the system.
Related: ‘I had no access’: ex-residents of controversial rehab centre say welfare payments were taken against their wishes
Earlier this year, the Guardian spoke with residents at an extreme Christian drug and alcohol rehabilitation centre named Esther House who said they felt forced to sign up to Centrepay.
Centrepay allowed the service to prop itself up with a guaranteed source of income, straight from the government, while it allegedly conducted gay conversion practices, exorcisms and forced baptisms, and subjected residents to psychological and emotional abuse.
In remote Indigenous communities, the Guardian has revealed how Centrepay allowed a rent-to-buy business to charge a single mother of five $6,500 for a TV worth $1,400.
The revelations should shock the public. But they shouldn’t shock government.
Financial advocates and community legal centres have been airing similar complaints for years. Louise Pratt, a Labor senator, has unflinchingly pursued Centrepay’s failings for years.
Yet it was only in May, after Guardian Australia’s pursuit of the matter, that the government announced a reform process.
Services Australia now appears to be genuinely engaging in a thorough consultation process, which includes meeting with affected welfare recipients and listening to stakeholders, to properly inform future Centrepay reforms.
The government deserves credit for acting, even belatedly.
Anyone paying attention will see obvious parallels to robodebt.
But there is a key difference apparent only to close observers of both scandals.
Related: Centrepay scandal: Labor to reform debit scheme to combat ‘predatory behaviour’
When Guardian Australia first revealed the deep flaws with robodebt and its unfettered reliance on income averaging in late 2016, the reporting was met with steadfast obstinance and denial.
The then leaders of Centrelink and their Coalition portfolio ministers refused to even countenance the criticism.
They rubbished media reporting and leaked against critics.
It took years to force the government to confront the obvious problems with the system.
When asked how the culture at Services Australia had changed recently, the new chief executive, David Hazlehurst, pointed to his agency’s handling of the Centrepay criticism.
“We’ve really adopted a very open approach to engaging with stakeholders on that,” he told Senate estimates in June. “We’re not seeking to come up with all the answers and polish them within an inch of or lives and then consult. We’re actually seeking to engage with people early.”
“Early” may seem a stretch to many who have been complaining about Centrepay for years.
But, at this early stage at least, the stark contrast between its handling of this and robodebt offers some hope of improvement.
Let’s hope the optimism is not misplaced.
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