The Albanese Government has abolished the use of debt collectors to chase down social security welfare payment debts, with all debt recovery to now be completed in-house through Services Australia.
The government said that as part of its bid to ensure Robodebt never happens again, it had put a stop to outsourcing social security welfare payment debts from external collection agents (ECAs).
This means from June 30, 2023, all final contracts between Services Australia and external debt collectors will expire, with outstanding debts to be transitioned in-house over the coming months.
Minister for Government Services and the NDIS Bill Shorten emphasised that the process of raising debts moving forward needed to be lawful, customer-focused and handled with care and respect.
“We have to look at the reality of who is affected; it’s often very vulnerable Australians, people who have gotten on government payments in the first place because they are at a vulnerable time in their lives,” Minister Shorten said.
“We have to stop giving their information to private companies and ensure the debt recovery process is lawful, fair and transparent.”
The Consumer Action Law Centre and Financial Counselling Australia have welcomed the banning of ECAs.
“While it’s too late for the thousands of vulnerable Australians who were harmed, I applaud Minister Bill Shorten for taking action to help ensure disasters like the Robodebt never happen again,” Consumer Action CEO Stephanie Tonkin said.
However, Ms Tonkin said if the Albanese Government wanted to bring debt collection in-house, it needed to comply with the Australian Consumer Law (ACL) like other debt collectors.
Financial Counselling Australia CEO Fiona Guthrie said one of the most troubling aspects of Robodebt was the commission-based approach used by external debt collectives that incentivised their poor behaviour.
“People were misled about the consequences of non-payment of debts with heavy threats of legal action, the garnishing of wages and bank accounts, tax refunds and other assets or income,” Ms Guthrie said.
“People were also threatened with departure prohibitions — when in fact the government did not intend to go that far.
“These were clear breaches of the ACL, and these breaches were signed off by the government of the time.”
While services like Centrelink will now use company staff to collect debts rather than outsourcing the task, other arms of government, such as the Australian Tax Office, will continue to use ECAs.
Consumer Action stands by its recommendation that ACL laws be amended to apply to all external and government debt collection services throughout Australia.
Furthermore, Financial Counselling Australia holds firm in its advocacy for The Australian Competition and Consumer Commission (ACCC) to be given the power to enforce compliance by the government.