A controversial government payment system wrongly diverted $700,000 in welfare money from vulnerable Australians to energy company AGL and helped prop up a Christian rehabilitation centre using gay conversion practices and exorcisms, Guardian Australia can reveal.
An investigation into Centrepay, which allows businesses access to a person’s welfare payments before they are deposited into their bank accounts, has found disturbing examples of misuse of a system that consumer advocates claim has become “a vehicle for financial abuse” and one Labor senator describes as “rife with exploitation”.
At least four rent-to-buy appliance companies that have been investigated and penalised recently for questionable conduct have also been allowed to continue to use the system to access the welfare payments of customers, many of whom are Aboriginal people living in remote areas.
Another 21 businesses remain on the Centrepay system while being investigated for potential breaches of consumer protection laws and policies by the corporate regulator.
Claims money ‘knowingly received’ from former customers
More than 15,000 businesses are approved to access Centrepay. It is used by an estimated 600,000 customers a month, who made 23.7m transactions last year. Each transaction incurs a 99c fee, paid by businesses registered with Centrepay to Services Australia, the federal government department that administers the system.
Consumer advocates, charities and financial rights groups say they have been warning governments for almost a decade that Centrepay was causing significant financial harm.
In a case currently before the federal court, AGL is being sued by the industry regulator for continuing to receive money from the welfare payments of hundreds of vulnerable Australians who it allegedly knew were no longer AGL customers.
Court documents obtained by the Guardian reveal the staggering scale of AGL’s receipt of welfare money from former customers.
The documents show AGL received a total of $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.
In most cases, the regulator alleges the company knew the welfare recipients were no longer AGL customers but took money from their Centrelink payments regardless.
In one case, the regulator claims AGL became aware that a Centrepay user had ceased being a customer on 12 January 2017. Despite this, AGL is said to have made 100 subsequent deductions worth $4,111 from the person’s welfare over almost four years using the Centrepay system. It only stopped the deductions in December 2020.
In another, it’s alleged AGL received $3,227 from a person’s welfare payments after learning they were no longer a customer. The person ceased being an AGL customer on 12 September 2018. The regulator claims AGL became aware of this four months later, but continued receiving money from the account for at least another year.
The largest amount claimed to be knowingly received by AGL from any single welfare recipient was $6,800. The company allegedly became aware the welfare recipient had ceased being an AGL customer on 23 February 2018 but received a further 74 payments via Centrepay until 11 December 2020, according to court documents.
The documents also show Services Australia wrote to AGL years earlier, on 14 June 2013, warning it of “serious non-compliance” with Centrepay’s terms and conditions, including “a failure to cancel a Deduction after a Customer ceased to be an ongoing customer” and “a failure to notify Services Australia on becoming aware of overpayments”.
AGL is defending the case and denies it had authority to control deductions via Centrepay.
The company says it took immediate steps to “remediate the issue” once it became aware “of overpayments made by some former customers through the Centrepay payment service administered by Services Australia”.
“AGL received no benefit from these overpayments and all those impacted have been refunded,” a spokesperson said.
“AGL promptly reached out to Services Australia, the administrator of this payment service, to ask them to cancel the deductions and facilitate refunds to those impacted.”
Exorcisms and gay conversion
Guardian Australia can also reveal that the Centrepay system helped to prop up a disgraced Christian drug and alcohol rehabilitation centre run by the Esther Foundation in Western Australia.
A WA parliamentary inquiry previously heard that Esther House, which has since closed, engaged in severe emotional and psychological abuse, “coercive and extreme” religious practices and LGBTQ+ suppression.
That included performing exorcisms and gay conversion practices on residents.
About 281 residents paid lodging fees to Esther House using the Centrepay system between 2006 and 2022.
Four survivors who spoke to the Guardian said they had been put under pressure to sign up to Centrepay, a supposedly voluntary system, to give Esther House early and guaranteed access to survivors’ welfare payments.
“We weren’t given an option, the papers were already filled out with our details and the details of the Esther Foundation and we were just told to sign them,” survivor Gabriel Osborne said.
Lucy Lorenti was sent to Esther Foundation to “treat” an eating disorder. While there, she said, she was subjected to regular exorcisms, psychological and emotional abuse and complete financial control.
She said she was made by staff to attend Centrelink with other women to sign up to Centrepay.
“We weren’t allowed to speak, we just had to sit there and they signed over our payments to Esther,” she said. “It was at the South Perth Centrelink. I remember it so clearly … I wasn’t allowed to say, ‘what are you doing with my money, where is it going?’.”
Lorenti said she always thought it “strange” the Centrelink staff didn’t question what was happening.
“If we’re in a residential facility because we’re not well enough to live on our own, how are we well enough to be signing over our benefits?” she said. “How is that OK?”
Esther’s control of her finances trapped Lorenti at the facility. She said her purse and bank cards were taken from her and she was left in the dark about how much was being taken from her welfare payment.
“The government had a duty of care and they really failed us. Esther had a duty of care and they failed us,” she said. “As some of the most vulnerable people in Perth, we were just failed time and time again.”
Another former resident, Sarah*, said she only realised upon leaving Esther that it had been taking almost half of their $800 fortnightly welfare payment.
“They’d sit you down and pull out a big ass pamphlet on why Centrepay is so good for the place,” she said.
“There were consequences [for not signing up] and I’ve seen them … you’d lose the right to see family, for a month to three months. You’d lose rights to any privileges, to phone calls, going out, privacy.”
$6,500 for a TV worth $1,400
Governments have been repeatedly warned of weaknesses in the Centrepay system. In 2013, a review recommended urgent reforms to protect vulnerable users. As recently as last month, Services Australia said it had “commenced a reform program for Centrepay” to address the concerns of consumer advocates.
Despite this, a series of rent-to-buy home appliance vendors that have previously been sanctioned by the Australian Securities and Investments Commission (Asic) remain approved for Centrepay use.
That includes Local Appliance Rentals, a franchise network of rent-to-buy operators working in areas with high Indigenous populations, which was fined in 2018 for irresponsible lending over an alleged failure to verify consumers’ financial situations, the inadvertent receipt of excess payments, the charging of excessive late fees and a failure to properly supervise franchisees.
Guardian Australia spoke to a single mother of five who in 2020 signed up to buy a television through a different rent-to-buy scheme in Queensland.
Denise* said she was living with family when a salesperson from the company knocked on the door.
She said she was encouraged to sign a contract to pay $86 a fortnight for the TV using Centrepay. She said she did not receive a copy of the contract but commenced paying each fortnight. When those automated payments were interrupted in 2022, Denise said, the company “started putting threats on me”.
She said she was not given any records of the progress of her repayments, but was sent a statement in 2022 of the amount she still owed.
She did not know why the payments had stopped but agreed to resume paying them after the company told her they’d “take her to court” if she didn’t complete the contract. Denise said she was “confused” by the arrangement and sought advice from Indigenous consumer advocates Mob Strong Debt Help.
Mob Strong said the contract Denise signed was a Word document created by the company, not a government form. On it, Denise had inadvertently ticked the box that gave the company permission to “indefinitely” deduct this payment from her account using Centrepay.
Denise said she didn’t complain about the company to the government. She didn’t know how. She was frightened and felt like the company was “bullying” her.
“I didn’t do any complaint with Centrepay. I just continued to pay it because of the threats they kept giving me over the phone,” she said. “And at the time I was in [a remote area]. There’s no court, there’s no government place that I could go to, or a lawyer and stuff like that. So I just kept paying back.”
Mob Strong said Denise had paid close to $6,500 for a TV with a retail value of $1,400.
The Consumer Household Equipment Rental Providers Association Inc (Cherpa), the industry peak body, says it is subject to regular government audits and strict regulations, including a 10% cap limiting the use of a person’s income for consumer leasing, introduced last year.
The president of Cherpa, Steven King, said the industry also had its own code of conduct stipulating that anyone in financial distress could return goods and free themselves of debt, stopping them from entering into a debt spiral.
He said the industry had low numbers of complaints to the Australian Financial Complaints Authority and its use of Centrepay was widely supported by customers.
King also rejected the suggestion that rent-to-buy operators should be removed from Centrepay due to isolated instances of Asic enforcement, which was itself often due to the actions of a single franchisee.
Asic told the Senate late last year it was investigating 21 businesses registered with Centrepay.
In February it issued an interim stop order for Urban Rampage, a clothing and homeware company that has stores in 10 remote Aboriginal communities, over concerns about how the financial capacity of its customers was determined.
Asic said it was also concerned that deductions from Centrepay could lead vulnerable customers into significant debt, leaving them unable to make ends meet.
The company has strongly disputed these allegations, saying it is a “lifeline retail network” for remote communities and that Asic’s indefinite suspension is having a “disastrous impact” on its Indigenous customers.
Urban Rampage said it had been audited 19 times by Services Australia since 2016, and never failed an audit.
“Many of our customers do not have access to traditional credit like people in cities – they don’t have Visa, Mastercard nor can they easily sign up for buy now pay later services like Afterpay and Zip Pay. So a primary benefit is a levelling of the playing field as it were to access to credit compared to non-First Nations people,” a spokesperson for Urban Rampage said.
“Also, it’s a system backstopped by the commonwealth government. There is a maximum amount that can be deducted in any given benefits payment cycle which is $200,” the spokesperson said.
They rejected the claim that Centrepay was a vehicle for financial abuse.
“This claim is entirely false and without substance in relation to Urban Rampage. With any provision of credit, there will always be a small number of people who may experience hardship with repayments and we help our customers through these rough times,” they said.
‘Fix this system’
Consumer advocates like Mob Strong Debt Help say they are pleased to see regulators looking closely at businesses targeting Indigenous customers, but they want the government to address the ongoing misuse of Centrepay by exploitative businesses.
“We suspect that some businesses are financially motivated to take advantage of Centrepay to deduct as much Centrelink as possible as there are no limitations and they get the money before the consumer,” Mob Strong lawyer Mark Holden said.
“Mob Strong and other consumer advocates have been fighting for Centrepay reforms to fix this system and stop exploitation by businesses but these reforms need to be faster.”
Labor senator Louise Pratt, a longtime critic of Centrepay, said the system remains “rife with exploitation”.
“We need to clean up Centrepay ensuring it can enforce consumer protection, corporations law including credit laws, to protect the interests of customers,” Pratt said.
“We need to ensure that Centrepay is not being used to exploit customers in markets where there is not enough access to consumer goods. We need to look at the supply of goods to these markets.
“I know that the government is working hard with regulators to fix these problems. I think, however, that there is a long way to go before they are fixed.”
The general manager of Services Australia, Hank Jongen, said the department treated customer exploitation very seriously and “priority reform work” on Centrepay was currently under way.
“It includes significant government, industry and customer consultation with a focus on safeguards and protections for customers to reduce financial harm,” he said.
“All instances of potential non-compliance are investigated. Potential non-compliance can be escalated to the agency directly through customer complaints or through escalation to the relevant regulatory bodies,” Jongen said in a statement.
“We don’t charge people to use Centrepay, nor can businesses charge their customers to use it.”
* Names have been changed
