Centrepay: a good idea that lost its way

Last week the Federal Minister for Human Services, Senator Kim Carr, announced an independent review into the Centrepay payment system. This announcement has been warmly welcomed by consumer organisations several of which have been pointing out the serious flaws in the current system for a number of years.

This following case study provided by the Indigenous Consumer Assistance Network illustrates the problem.

Indigenous Consumer Assistance Network


In 2011, a client complained to ICAN about the practices of an unlicensed credit provider, operating in Yarrabah and the Southern Cairns region. Through ICAN’s investigations it was identified that the unlicensed credit provider utilised the Centrepay system (registered as a landlord), to recoup monies lent at exorbitant interest rates. ICAN referred the matter to Centrepay and the Queensland Office of Fair Trading.

As a direct result of the Queensland Office of Fair Trading’s investigation the unlicensed credit provider entered into a conduct deed on the 21st of May 2012 for breaches of the interest rate cap.  It was identified in the investigation that repayments for loans were made by cash, withdrawn from the clients debit cards held by the fringe lender, or repaid using Centrepay. The conduct deed required the unlicensed credit provider to repay $10,827.01 to borrowers and contribute $20,000 to the Consumer Credit Fund.  It also required that the unlicensed credit provider not take any action against any customer to recover unpaid or partially paid fees for borrowings.

Source: ICAN 


Centrepay Review Welcomed by Financial Counselling Australia

Financial Counselling Australia (FCA) welcomed the Minister’s announcement.

“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 benefit to pay bills, with Centrepay crediting this money directly to the relevant business and deducting 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 operates in practice.”

FCA’s concerns lead them to prepare a 38-page report – ‘Centrepay: A good idea that has lost its way’. The report calls for a root and branch review of Centrepay to identify its core purpose and to assess the criteria and assessment processes for granting business access to the system.

“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 contracts end up costing consumers at least two to three times the retail cost of the goods. Many consumers would have been better off accessing a community-based No Interest Loan;
  • 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 compliance of businesses using the system.

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.


The government needs to ensure that the voices of the many vulnerable and disadvantaged consumers affected by Centrepay’s practices are heard. The government needs to think about ways in which this can be done – for example by commissioning organisations like ICAN and FCA to document and analyse consumer experience to make it available to the reviewer – Gordon Renouf, CFA Deputy Chair