In February the Albanese government announced a $97m compensation scheme for thousands of Aboriginal people who lost all that they had paid to the predatory funeral insurer ACBF-Youpla.
When ACBF-Youpla collapsed in 2022, it left more than 13,000 Aboriginal people, some of them elderly and in palliative care, without the means to pay for funerals.
Governments had been warned for decades that ACBF-Youpla was a source of complaint and concern. The financial regulator, Asic, has now launched court proceedings against five former directors, alleging governance failures and director misconduct.
But for 16 years it was allowed to rake in millions using the government’s own Centrepay system. Centrepay is a voluntary bill-paying service for people receiving welfare payments to make automatic deductions for essentials such as rent and utilities. ACBF-Youpla collected from its policyholders via Centrepay a staggering $169m before it was kicked off the scheme in 2015, paving the way for its eventual financial collapse.
According to Services Australia, the department that administers the scheme, Centrepay is supposed to reduce “financial risk”.
But as Guardian Australia revealed last week, Centrepay is exposing some of the country’s most vulnerable people to financial harm.
It has become a “vehicle for financial abuse”, according to consumer advocates. One Labor senator says it is “rife with exploitation”. And Asic says its concerns about unscrupulous operators are going unheeded by the government.
Energy company AGL received hundreds of thousands of dollars from welfare recipients using Centrepay, long after they had ceased being customers. The company is defending a case before the federal court in which it is being sued by the industry regulator and denies it had authority to control deductions via Centrepay.
In response to questions from the Guardian, Services Australia was forced to admit it is working with a second energy retailer, Queensland’s Ergon Energy Retail, to return overpayments made via Centrepay. It is unclear how much money was wrongly paid to Ergon or over what period.
A disgraced Christian rehab facility in Perth used Centrepay to take control of the welfare payments of hundreds of patients while subjecting them to exorcisms and gay conversion practices.
And rent-to-buy businesses are charging Aboriginal people exorbitant prices for household appliances but remain on the Centrepay register despite having been penalised. The Guardian has also uncovered several other cases where companies are before the courts for potentially breaching consumer protections.
There are no limits on the number of Centrepay deductions an authorised organisation can receive.
Late last year, Asic identified 122 consumer lease providers still listed on the Centrepay register that it told a Senate hearing “should all be very closely reviewed”.
Asic’s spokesperson at the time, Karen Chester, said the regulator had given Services Australia a “detailed list” of providers about which they held concerns. But Chester seemed frustrated. Asic’s advice didn’t seem to be “having any impact in terms of the entities being removed from the register,” she told a Senate hearing in November.
Five months after providing that list to the government, Asic says its concerns remain.
“A number of consumer lease providers remain on the Centrepay register. While we can’t provide the full list, we can confirm that some of these providers are businesses that have previously been the subject of Asic action,” a spokesperson told Guardian Australia.
“We remain concerned some businesses on the register provide consumer leases which may place customers into financial hardship when Centrepay deductions for consumer goods end up prioritised over essentials such as rent and food.”
Services Australia says it takes exploitation seriously. It told the Senate that 51 household goods businesses will be subject to a compliance review this financial year. It removed 12 businesses last financial year for non-compliance.
It is reviewing the Centrepay system with a focus on safeguards and protections for customers to reduce financial harm, department spokesperson Hank Jongen, said.
“We treat customer exploitation very seriously and 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.
But Indigenous consumer advocates say the complaints process is challenging for those living in remote communities who have low digital inclusion and English as a second or third language.
Centrepay was last reviewed in 2013. Concerns were raised about the proliferation of rent-to-buy companies. The review highlighted unconscionable selling practices, including targeting vulnerable Indigenous consumers, and selling door to door. It said consumers were continuing to pay for goods after the contract term had ended, and that Centrepay could do more to enforce compliance.
At the time, Financial Counselling Australia described it as a “good idea that’s lost its way”.
More than 10 years later, Centrepay has grown. It has more than 620,000 customers and 15,000 businesses. It facilitated 23.7m transactions last year, worth $2.7bn.
The Mob Strong senior solicitor Mark Holden was among the advocates who helped secure compensation for the victims of ACBF-Youpla. Holden says reform needs to “move faster”.
“The priority here is to prevent any further financial exploitation and community harm. Getting on to Centrepay is meant to help vulnerable consumers and has a higher standard of care, requirement and monitoring,” Holden said.
“This is because these consumers are being asked to give up their financial safety net for an essential service when it could mean they miss a meal. We need to see much stronger compliance where there is evidence of misconduct.”
Do you know more? Contact lorena.allam@theguardian.com or christopher.knaus@theguardian.com
