Tougher Centrelink Debt Rules Grab $42 Million From Poor

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20th October 2010, 02:55pm - Views: 1050

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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.


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.

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