The federal government investigated just 4% of businesses that enjoy direct access to the welfare payments of vulnerable Australians via Centrepay and found almost half to be non-compliant, prompting alarm from Australia’s corporate regulator.
The government is consulting on a proposal to overhaul Centrepay, a system that gives approved businesses access to welfare payments before they reach a recipient’s bank account.
The system was designed as a budgeting tool, allowing recipients to ensure they first covered essentials, such as rent and electricity, prior to receiving the rest of their welfare payment.
But Guardian Australia has revealed widespread problems with the system that have facilitated the financial abuse of vulnerable Australians, including its use by major energy retailers to wrongly take money from former customers and the propping up of an extreme Christian rehabilitation centre practising forced baptisms and exorcisms.
The corporate regulator, Asic, has repeatedly warned Services Australia that the weaknesses in the system are allowing predatory rent-to-buy home appliance operators to charge those living in remote Indigenous Australian communities exorbitant amounts for low-value goods such as fridges and television.
In a submission to the government’s current reform process, Asic called for greater enforcement of the Centrepay rules on non-compliant businesses.
Asic cited data showing that in 2022-23 the government only investigated 382 of the 10,205 registered Centrepay businesses, about 4%, for their compliance with the rules.
Of those, about 42%, or 164 businesses, were found to be non-compliant.
Asic said it supported “the observation [in the discussion paper informing the reform process] that a new approach to compliance is needed”.
“Without understanding the basis on which those 382 businesses were selected for review, we observe that 42% appears to be a high rate of non-compliance,” Asic said.
Asic also said it supported greater measures to stop overpayments via the Centrepay system.
Three separate energy retailers were referred to the Australian Energy Regulator in recent months over their failure to stop taking the welfare money of people who had ceased being customers via Centrepay.
The Guardian has previously revealed that Origin and Ergon Energy are among those referred.
AGL, meanwhile, is awaiting a decision in the federal court over its alleged receipt of overpayments via Centrepay. The company is accused of taking more than $700,000 in Centrepay payments from about 575 vulnerable people who had ceased being AGL customers years earlier.
Once a decision is handed down in the AGL case, the AER will consider how to act on the other three referrals.
“The AER is awaiting judgment in these proceedings before considering any action against the three retailers referred by Services Australia,” the AER said last week. “However, the AER is working with these retailers to ensure that affected customers are refunded in a timely fashion.”
In its submission, Asic said a common cause of overpayments was the creation of “indefinite or ongoing deduction arrangements” using Centrepay.
“We support proactive measures by businesses to inform customers when their arrangements have ended and remediate customers if there is an overpayment,” Asic said. “A holistic approach to informing customers should be adopted in line with their circumstances, such as by using multiple communication channels.”
The reform process was triggered by a Guardian investigation earlier this year. That investigation showed how Centrepay had been used to prop up an extreme Christian rehabilitation service practising forced baptisms and physical and emotional abuse on vulnerable Australians.
The Guardian also revealed that AGL had allegedly taken on average $1,233 from 575 former customers using Centrepay. In one case, it made 100 subsequent deductions worth $4,111 from a customer for more than three years after the individual had ceased being an AGL customer. AGL is defending the case and denies it had authority to control deductions via Centrepay.
“AGL received no benefit from these overpayments and all those impacted have been refunded,” a spokesperson said, adding it took “immediate steps to “remediate the issue”.
Services Australia has previously acknowledged the system needed improvement and said reform was a priority.
“We know we have work to do to ensure Centrepay operates as intended. This includes how we enforce compliance,” Services Australia spokesperson, Hank Jongen said.
“These submissions do not mark the end of the consultation process. There will be more consultation ahead with the community, and particularly those who have direct experience using Centrepay, as we progress towards meaningful reform.
“Non-compliance in the Centrepay context can include a broad range of things from businesses not keeping their contact details up to date to more substantial concerns, including deliberate wrongdoing,” he said. “We formally review businesses where we suspect or have evidence of serious non-compliance.”
