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Media Release
20 October 2010
Tougher Centrelink debt rules grab $42 million from poor
“Centrelink’s efforts to speed up the collection of overpayments will recoup $42
million over four years and will drive 90,000 people into increased hardship,”
warned the Welfare Rights Centre today during Anti-Poverty Week.
“Centrelink’s standard procedure is to take 15% of a person’s Social Security
payment until the entire debt is repaid. The rate used to be 14% but that was
changed to 15% from the beginning of this year. People in financial hardship
can negotiate to pay a lower amount back per fortnight. The former Minister for
Human Services, Chris Bowen, now the Acting Minister while Minister Plibersek
is on leave, told the Joint Committee of Public Accounts and Audit earlier this
year that Centrelink recovered debts at the rate below the standard rate ‘to
avoid putting them [the people] in financial hardship’.
However, from 1 January 2011, Centrelink will change its procedures yet again.
This time the change is aimed at reducing the number of people who repay at
lower than the standard rate of recovery. In recognition of the financial hardship
that many people in receipt of Social Security encounter about 70% of those
with a Centrelink overpayment currently pay less than the standard 15% rate.
They do nevertheless pay the debt back in full.
From the beginning of next year, people who have negotiated to repay a debt
below the standard rate will be contacted by Centrelink every 12 weeks to find
out if they are still in financial hardship. Many are certain to feel harassed and
intimidated by the Centrelink contact and bound to agree to re-payment
arrangements which they just can’t afford.
Currently, $1.174 billion of Centrelink debt is under recovery arrangements, with
$243 million not under recovery - usually because the debtor can’t be found or
is no longer receiving a Centrelink payment. A further $157 million is temporarily
written off. Currently 70% of the debt base is being repaid, with 84% being
recovered by way of fortnightly deductions from recipients’ payments.
The convention has been that that the recovery of debts should not place
Centrelink recipients in financial hardship - but this is exactly what this new
approach may be doing. It will be harder and tougher for people to negotiate to
pay small but regular repayments of debt.
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Government asked to reconsider
The Welfare Rights Centre is calling on the Government to reconsider these
negative changes.
Centrelink does not have a clear understanding of the nature of indebtedness
amongst those on welfare payments. Not enough is known about the bigger
picture, and these households may also have debts to the Australian Taxation
Office, child support, state debt recovery, utilities or credit card providers.
Centrelink should care a bit less about whether it is meeting its debt recovery
key performance indicators. Instead, it should focus on how Australian
households experience debt and financial hardship and what it can do to
minimise mistakes and reduce administrative error contributing towards
Centrelink debts.
Welfare Rights is also left wondering whether the changes to debt recovery in
general are a tricky way for the Government to claw back some of the 2009
historic pension increase. A single age pensioner with a small Centrelink debt
who was paying a debt back at 10% could end up paying an extra $13 per week
if they were forced back to a 15% recovery rate. An unemployed person,
already struggling to meet surging utility and other costs on $234.85 per week,
can ill afford a few extra cents, let alone a few dollars.
Aggressive approach to Age Pensioners in debt
A further problem of increasing concern is Centrelink’s aggressive approach to
the recovery of debts incurred by Age Pension recipients. In a number of recent
cases Centrelink has inappropriately threatened to garnish term deposits even
though the debt is already under repayment and reviews are underway.
We are finding that Age Pensioners are not told that Centrelink cannot force a
break to the term deposit before it matures. Pensioners are anxious to avoid
embarrassment should the bank find out that they are being chased by
Centrelink and as a result, feel undue pressure to break the term of the deposit
early. Centrelink’s actions are unconscionable in these circumstances, when
the review is imminent and the debts are already under repayment.”
For comment: Maree O’Halloran, Director: 0417 672 104 or
Gerard Thomas: Policy and Media Officer: 0425 296 882.
NEWS 
