22nd November, 2012 –   Financial Counselling Australia (FCA) has welcomed the announcement by the Federal Minister for Human Services, Senator Kim Carr, of an independent review into Centrepay.

“Centrepay was set up to help Centrelink recipients budget for essential costs, such as rent and utilities,” said Fiona Guthrie, Executive Director of FCA. “At the request of a Centrelink recipient, a regular amount is deducted from their payment to pay bills, with Centrepay crediting this money directly to the relevant business which pays an administration fee.”

“It’s a great service which currently helps more than half a million Australians manage and prioritise their money. Financial counsellors strongly support the principles underpinning Centrepay. We do, however, have very serious concerns about the way in which Centrepay has been operating in practice.”

These ongoing concerns culminated in a 38-page report – ‘Centrepay: A good idea that has lost its way’. The report called for a root and branch review of Centrepay to assess its core purpose and the way in which it is operating.

“We are very concerned that due to the predatory  or unfair behaviour of some businesses, some consumers are being harmed rather than helped by Centrepay,” said Ms Guthrie.

The FCA report outlines a number of related concerns with Centrepay.

  • Access to Centrepay by rental and lease companies. These type of contracts end up costing consumers at least two to three times the retail price of the goods. Many consumers would have been better off accessing a community-based No Interest Loan Scheme;
  • Unconscionable selling practices by some companies, including targeting vulnerable Indigenous consumers, selling door-to-door (in breach of Centrepay contracts that prohibit this form of sale). There are cases where goods sold in this way would cost consumers more than eight times the retail price;
  • Consumers continuing to pay for goods after the contract term has ended;
  • Limited checks and balances about the affordability of Centrepay deductions, with individuals able to allocate up to 100% of benefits to Centrepay;
  • The ability of Centrepay to adequately monitor and enforce business compliance with the system.

FCA congratulates Senator Carr on his decisive action and looks forward to working with the independent reviewer.

As well as financial counsellors, FCA’s report was developed in consultation with a number of other community organisations: Consumer Action Law Centre; First Nations Foundation; Footscray Community Legal Centre; Indigenous Consumer Assistance Network; Murray Mallee Community Legal Service; National Welfare Rights Network and the Public Interest Advocacy Centre.

Anyone who is in financial difficulty can contact a free and independent financial counsellor on 1800 007 007.

For further comment please contact:
 
Fiona Guthrie, Executive Director, FCA, 0402 426 835