Lucy* is from a remote Aboriginal community in the Northern Territory and her first language is Galpu. She’s a long-term recipient of Centrelink payments.
From 2008 to 2013 Lucy used a government service called Centrepay to make automatic deductions from her income to pay for her Telstra landline. She was in credit on her Telstra bill within two months and eventually built up a credit of more than $6,300 by 2013, when the automated payments stopped.
In April 2018 Lucy had to visit Darwin for medical treatment and signed up for a Telstra mobile plan. When she signed the contract Lucy didn’t know – and wasn’t told – she had more than $4,000 in credit on her landline account.
Nine months later she was more than $1,000 in debt on the mobile plan, and the debt was sold to a debt collector. She received a default listing on her credit file in September 2019, when her landline credit was more than $3,400.
At that point Lucy sought help from a financial counsellor. Her case with Telstra is now settled but consumer legal rights advocates say it highlights problems with the Centrepay system.
Centrepay was designed to help welfare recipients pay for essentials including rent and power bills via automatic deductions paid directly to providers. But dozens of the businesses approved to access the government system are allegedly seriously misusing it, as Guardian Australia revealed on Wednesday.
The energy giant 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.
A disgraced Christian rehab facility in Perth used the system 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, or despite being before the courts for potentially breaching consumer protections.
Telstra says Lucy was among a number of Indigenous customers whose experiences of its sales practices triggered a major review in 2019 and 2020. At the time Telstra was facing court action by the Australian Competition and Consumer Commission, which alleged the telecom’s sales tactics were in breach of consumer law.
In May 2021 Telstra was fined $50m for signing up more than 100 Indigenous Australians to mobile phone contracts they did not understand and could not afford, between January 2016 and August 2018.
Many of those who signed up for plans were, like Lucy, from regional or remote communities, spoke English as a second or third language and, because their access to clothing, household goods and services was limited, used Centrepay arrangements to meet their expenses.
Telstra says it continues to offer Centrepay to customers but has overhauled how it monitors sales and compliance, and how it assesses consumers’ capacity to service debt.
“We conduct proactive reviews of credit amounts on customer accounts and ensure a particular lens is applied to vulnerable customers, including customers using Centrepay, to pay for their services,” a Telstra spokesperson said.
“However we are often limited in terms of resolving Centrepay issues given the customer has the direct relationship with Centrelink in relation to the arrangement.”
Q&A
What is Centrepay?
Show
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.
Consumer advocates say they have been raising concerns about Centrepay for almost a decade.
Lucy’s case is one of 17 examples of Centrepay failures outlined in a letter to the Albanese government from a coalition of consumer legal rights advocates, sent in March last year and seen by Guardian Australia.
The group, led by the Financial Rights Legal Centre, said Aboriginal people were seeking food and emergency relief because they were in debt to multiple businesses, each of which had access to Centrepay to take what they were owed before the money lands in their customers’ accounts.
Other examples cited include:
-
A financial counsellor in Alice Springs said Jenny* had sought an emergency food voucher in early January 2023 and returned a week later for another. Jenny disclosed she was only receiving $200 of her jobseeker payment as a substantial amount was going towards Centrepay repayments to a clothing store and a local transport company. Jenny said the clothing company had allowed her to sign up for Centrepay at two different stores.
-
Belinda*, a Yolngu woman with a long history of homelessness and described as “extremely vulnerable”, presented to a charity for emergency relief in January 2023. Belinda’s Centrepay deductions were more than $400 a fortnight to local retail stores for items no longer in her possession.
-
Dorothy*, a 26-year-old Aboriginal woman, had just moved to Tennant Creek in December 2022 when she reached out to a financial counsellor for a food hamper for her two children. The financial counsellor worked out that Dorothy was paying hundreds of dollars in Centrepay deductions to local retailers, including a rent-to-buy scheme for home appliances and a local bus transport service, leaving her with a bank balance of zero on the day she sought relief.
-
Jessie*, who is elderly, had a Centrepay arrangement at a local clothing store. Jessie would be taken into the store by family members who would buy large amounts of clothing on her store account. She had paid in excess of $20,000 to this store over the course of three years. It was alleged that the store was not open to discussing the prospect of elder abuse or setting up procedures to stop this occurring.
after newsletter promotion
Denise*, a single mother of five, tells Guardian Australia how she was encouraged to sign up to a rent-to-buy scheme for a TV.
She says she had heard a lot about Centrepay because “a lot of families went through them”, and signed a contract to pay $86 a fortnight. She didn’t receive a copy of the contract, she says. When her automated payments were interrupted in 2022, Denise says, the company “started putting threats on me”.
She didn’t know why the payments had stopped but agreed to resume paying them after the company told her it would “take her to court” if she didn’t complete the contract. Denise says she was “confused” by the arrangement and sought advice from the Indigenous consumer advocates Mob Strong Debt Help.
Mob Strong says the contract Denise signed was a Word document created by the company, not a government form. On it Denise had inadvertently ticked a box giving the company permission to “indefinitely” deduct this payment from her account using Centrepay.
Denise says she didn’t know how to complain about the company to the government. She felt the company was “bullying” her.
“I didn’t do any complaint with Centrepay,” she says. “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.”
Denise says she is now settled in her own home and no longer needs rent-to buy schemes to obtain the things she needs. But she says family members in remote areas rely on Centrepay to rent-to-buy goods they can’t get locally, including fridges and washing machines – big items that are expensive to ship to remote communities.
Rental companies offer to add the cost of shipping to Centrepay contracts, Denise says.
“It’s much easier for older people, they don’t have to ring the bank,” she says. “Because there’s no bank up in the remote areas. That’s why they use Centrepay, it’s easier for them.”
She wants people in remote areas who use Centrepay to have better ways to settle disputes and more information about consumer rights. “I just don’t want other families to be in the situation that I was,” she says.
Mob Strong, which has supported Denise, says people think they can trust businesses that are cleared to use Centrepay.
“People believe that they are signing with a business that has the tick of approval of Centrepay,” says a Mob Strong financial counsellor, Bettina Cooper. “But with little or no affordability checks, they are often left financially overcommitted.”
Services Australia says it is reviewing the Centrepay system.
“Priority work to reform Centrepay policy is currently under way,” a Services Australia spokesperson, Hank Jongen, said in a statement. “It includes significant government, industry and customer consultation with a focus on safeguards and protections for customers to reduce financial harm.”
All businesses that use Centrepay had to comply and act in accordance with all applicable Australian laws, as well as Centrepay policy and terms, 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.”
*Names have been changed