The Guardian, 17 January 2018:
Centrelink has given companies accused of exploitation and misconduct direct access to welfare recipients’ money through its automated debit system.
The companies were granted access to the Centrepay system, which allows Centrelink to deduct money from welfare payments to pay approved businesses early.
The system is designed to ensure rent and power bills are paid by giving government-approved real estate agents and electricity retailers the first bite of social security payments.
But the federal government has long faced criticism for opening up Centrepay to household appliance rental companies, which rent out white goods, mobile phones, laptops and furniture.
A 2015 report from the corporate regulator found the sector was targeting Centrelink recipients and charging exorbitant prices, often more than five times the retail price of the leased goods – the equivalent of a 248% interest rate.
An independent review of Centrepay in 2013 warned the government that lax oversight was giving unscrupulous operators access to the system, raising the risk of exploitation.
More than four years on, those risks appear to still be materialising.
Guardian Australia has found at least four appliance rental companies were granted approval to use Centrepay, despite previously being punished by the corporate regulator or placed on binding agreements to rectify potential legal breaches.
One of the businesses, Amazing Rentals, continued to hold Centrepay approval for more than two years after the Australian Securities and Investments Commission (Asic) raised concerns it had failed to comply with responsible lending obligations. Most of the customers of its Darwin store, including many Indigenous Australians, received government benefits as their only source of income.
The company was renting white goods to people who could not read the contracts and did not understand what they were signing up to.
The corporate regulator accepted an enforceable undertaking from the company in June 2015, which forced it to shut down the store for 12 months, refund customers,
“We had examples of consumers who were on disability pensions or Newstart allowance where they were literally running out of money at the end of the month because of the impact of the repayments that were being made for those consumer lease products,” Asic senior executive Michael Saadat told the ABC at the time.
Amazing Rentals was eventually stripped of Centrepay approval in September last year, about the same time it became embroiled in a massive data breach, which exposed 26,000 documents with the personal details of 4,000 people in the Northern Territory and Queensland.
Other companies still approved for Centrepay include franchise Rent the Roo, which was fined $27,500 by Asic for breaching responsible lending laws in 2013; and Mr Rental Australia, which was found to have imposed a potentially unlawful early termination fee, and was forced by the regulator to refund about 1,560 consumers more than $300,000 in total.
Centrepay approval is also still active for The Rental Guys, a company found to have failed to meet responsible lending obligations to customers mainly from regional Indigenous communities, and not verifying their ability to make the rental payments. The company also placed vulnerable customers on new contracts that imposed higher fees and removed the right to own goods once the rental period was finished.
Rent-to-buy companies approved for the Centrepay system sign contracts with customers knowing they are living on welfare payments.
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