Centrelink’s debt recovery disasters continue

debt recovery

The welfare agency Centrelink has been under investigation for months now as a result of its automated debt recovery scheme, also called robo-debt. Due to the controversial system, more than 20,000 welfare recipients were accused of over-payments and debt recovery notices sent out. Those recipients were later found to owe less than the amount stated – or even nothing but may have ended up with even higher debts when agreed to pay the money claimed. As a result, the welfare agency was forced to clear or partially reduce one of every six debts raised against welfare recipients within July 2016 and September 2017. The government has been able to recover about $84m of &350m debts that have been identified by the robo-debt system, a system that relies on a process of automated data-matching with what welfare recipients told Centrelink against their tax records.

The system started to become flawed when the government reduced on staff in July 2016 and the program began to send a letter to welfare recipients without the previous compliance team checking differences in tax and Centrelink records. The recipient was then asked to prove they had not been overpaid by the means of old bank statements to explain their balance. If the person did not respond to such letter, the automatic system then used an imprecise process to calculate the welfare recipient’s debt by averaging out the individual’s yearly income. As a result of the outcome, Centrelink often concluded that the recipient had worked an entire year and was therefore not qualified for welfare, an assumption that was proven wrong often but led individuals to large debt. Nevertheless, if an individual did not settle the debt or failed to pass on updated information, the welfare agency hired private debt collection agencies to retrieve the outstanding payment. Some welfare recipients have accused such debt collectors of harassment, intimidation and threats and so far the government has refused to disclose what commission rate it is paying them. This is a highly criticized issue as the Australian Tax Office works with a different approach at retrieving an individual’s debt since the office pays their hired debt collectors a flat fee.

As a result of the objection, Centrelink has since either reduced or wiped about 29,000 debts while the government still claims that the reduction in debt was adjusted because of new and accurate information the recipients have provided rather than admitting the system shows flaws. Critics worry that recipients may have paid the original debt not only because they trusted the government, but a high number of individuals might have been unable to dig up proper evidence after such a long time to proof their unemployment.

Individual politicians have come forward asking the government to apologise to welfare recipients, especially to the ones whose debts were wiped out completely. The chief executive of the Australian Council of Social Service even pleas for the government to shut the program down as she says it causes serious distress and harm upon the community. Undoubtedly, receiving false debt notices can put a strain on people who are already in a difficult financial and personal position.

Despite the problems, the government is still using the automated data matching process to this day claiming, that improvements have been made and that if given the right information the system can accurately calculate debts. Last year a spokesman of the department even boasted that the system was supposed to stop sending out debt recovery letters in early November for people to not receive a debt notice over the holidays. The letters continued to get mailed again in mid-January this year.

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