Centrepay scandal: Labor to reform debit scheme to combat ‘predatory behaviour’

<span>The Australian government says it will reform the Centrepay system, a voluntary bill-paying scheme for welfare recipients that has been plagued with problems. </span><span>Composite: Guardian Design</span>
The Australian government says it will reform the Centrepay system, a voluntary bill-paying scheme for welfare recipients that has been plagued with problems. Composite: Guardian Design

The Albanese government has pledged to reform the Centrepay debit system and has referred three energy companies to the regulator for using the system to wrongly take money from welfare recipients.

The announcement on Tuesday afternoon follows a Guardian Australia investigation identifying deep and ongoing failures with the Centrepay system, including its use by the major energy retailers AGL and Origin to wrongly take money from the welfare payments of former customers.

In other cases, Guardian Australia has revealed how unscrupulous rent-to-buy household appliance retailers have used the system to charge exorbitant amounts to vulnerable Australians, particularly in remote Indigenous communities, and how an extreme and disgraced Christian rehabilitation service used Centrepay to prop itself up financially.

The government services minister, Bill Shorten, described Centrepay as a usually “excellent” service that is being undermined by what he described as “predatory behaviour”.

“We want to send a message to businesses that predatory behaviour is unacceptable, and we’ll continue to work with regulators and put greater safeguards in place to ensure vulnerable people are protected,” he said.

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 it has already penalised remain on the system. 

Calls are mounting for 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.

Shorten announced a review would take public submissions from Centrepay users and speak with businesses, consumer advocates and others. The review’s focus has been shaped by several government departments, Anglicare, Mob Strong Debt Help, the Australian Council of Social Service and Economic Justice Australia.

Meanwhile, the government has also announced it has referred three energy retailers to the Australian Energy Regulator over their use of Centrepay. The government did not reveal which retailers have been referred, but it follows the Guardian’s revelations that Origin and another energy retailer, Ergon, were in talks with Services Australia to return money wrongly taken from welfare recipients using the system.

Related: ‘Financial abuse’: how a debit scheme to help vulnerable Australians led to exploitation instead

AGL is already before the federal court on an allegation it wrongly took $700,000 from about 500 former customers using Centrepay over a period of years. The money has since been returned. Freedom of information documents obtained by Guardian Australia show its use of Centrepay hasn’t been audited by the government for two years, despite the widespread overpayment allegations.

Shorten said the government would implement a range of “immediate changes” to the system prior to the review process. That included “increased scrutiny, accountability and consequences” for companies that use Centrepay to overcharge people.

It is also providing increased specialist support for customers who may owe significant overpayments and is improving communications with customers about any business that has been restricted from using Centrepay by the corporate regulator Asic.

“Our firm focus is on the people,” Shorten said. “We want Centrepay to remain as a safe and useful financial tool for people on income support, but we must work across government to stamp out predatory behaviour.”

The government says submissions to the review will close on 2 July and the review’s report will be made public once complete.