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Centrepay Review
Centrepay is Centrelink’s automated bill-paying service.
This works by deducting payments from Centrelink
benefits prior to them being paid to the recipient. This in
many ways is not a bad idea (at least in theory).
Centrepay has been operating since 1998 (Carr, 11/11)
and currently has 545,000 recipients and 13,500
businesses (Ibid) using it.
On the 11th of November the (Federal) Minister for
Human Services, Senator Kim Carr announced an
independent enquiry into Centrepay and we felt this was
a good time to run our analytical eye over this not too
insignificant industry that turned over $1.76 billion (Ibid)
last year.
We reproduce here some of the text from the ‘official
Centrepay brochure’ (Centrelink 5/12/12)
What is Centrepay?
Centrepay is a free direct bill-paying service
offered to customers receiving Centrelink
payments. Through Centrepay you can choose
to pay bills by having a regular amount deducted
from your payments and transferred electronically
to an approved Centrepay organisation.
Why use Centrepay?
Parenting Payment changes for
previously ‘grandparented’
recipients
There are significant changes to
Parenting Payment for those who
were originally protected when the
rules changed in 2008. The
effective exemption of these
persons from moving to NewStart
Allowance when their youngest
child turns six (partnered) or eight
(single) has now been removed
and if children are above this age,
they will need to qualify for
another payment after the 31st of
December 2012. In theory most
recipients whom this will affect
should know (Centrelink claims to
have told them all) but it is likely
that this will still come as news to
some persons. Anyone who has not
been contacted needs to contact
Centrelink ensure that they
confirm eligibility for a payment
post 1st of January 2013.
Centrepay is voluntary. Customers who choose
to use Centrepay benefit from its convenience
and security knowing that their bills are under
control. Instead of having large bills every month
or quarter, your bills are paid in manageable
amounts from your payments, making it easier
for you to budget.
Red Tape – SSRV Newsletter Volume 26
Issue 3
December 2012
We will return to a couple of points made in
the brochure later our discussion.
Centrepay: What it’s not
Centrepay is not an entitlement or
requirement under Social Security law. Thus
it is not part of what people may assume is
the usual Centrelink system (if these days this
really means anything). Thus the appeal
rights (etc) that one has under social security
law do not apply. In effect Centrelink is
operating as a payment supplier, not
dissimilar to a bank or a post office. Whilst
indeed there may be many significant
improvements that could be made to the
social security appeals system, one only
realises how significant it is when one faces a
system such as that of the banks or post
offices or other such monoliths whose
concerns about customer rights are at best
‘beholden’ to those of profit and self –
protection.
One could be forgiven furthermore for
noticing a strong similarity between
Centrepay and voluntary income
management. There are, of course,
differences, but you can imagine how useful it
is when implementing income management
to already have a system that can do the work
at least with the automatic payments
How it works (in theory)
A person who wishes to utilise the system
registers their desire to pay one or more
suppliers with Centrelink. Many bills have
notices like this amongst their payment
options.
It is actually very informative when you read
this little snippet. Remember how
Red Tape – SSRV Newsletter Volume 26
all that info from Centrelink that talked about
‘voluntary’? How voluntary is it if the supplier
can send you the form? It is this ability (not
related to this instrumentality we hasten to
add) that the biggest issues rise.
Positive things
Centrepay in its very essence is a good idea.
Somewhat cheekily (remembering where
they stole the idea from) Financial
Counselling Australia (the Financial
Counsellor’s peak body) called their report
into Centrepay “Centrepay – a good idea that
has lost its way”. We’ll return to the report
and the issues its raises a little later.
Budgeting to pay for particularly utilities and
rental can strain a lot of professional people’s
budgets and brain space. A system that allows
people on the lowest incomes in Australia to
do it, particularly without having to think
about it, is positive at least from the ‘bill
shock’ point of view. Furthermore automatic
payment of rental (particularly) should mean
that people are less likely to be evicted due to
rental arrears.
‘Pretenses and myth making’
Before we touch on the specific issues with
Centrepay (particularly those raised by the
Financial Counsellors) we need to discuss the
pretenses and the myth making that things
like Centrepay can contribute too. It is
important to remember myths are things that
create presumptions by other people and
allow them to presume things that just are
not correct. Centrepay is part of the great
social security ‘budgeting’ myth. This is
assisted by the existence of commercial
budgeting organisations that fill daytime and
late night television with their
advertisements. The myth goes that the
reason people struggle on social security
payments is that they don’t budget correctly,
not that the payment is appallingly low. In its
submission to Prof Brian Howe’s Insecure
Work Enquiry (see August’s Red Tape for
more info about this) the National Welfare
Rights Network:
Issue 3
December 2012
“..warned that Australia’s unemployment benefit was so
low as to “raise issues about its effectiveness” in providing
the financial resources needed to assist Australians to find
employment or participate in skills acquisition, study or
training”.
It is clearly not enough to live on either. But
the existence of all these budgeting myths
manifests itself in ways that would not seem
to be connected until you realise they have
one main thing in common – Centrelink.
Centrelink like all bureaucracies has created
or reinforced a series of myths like the one
that budgeting allows people to overcome not
having enough money. One has only to read a
letter from Centrelink debt collection that
sometime allows a person to reduce the
repayments on their Centrelink debt for three
months. The letters say “this will allow you to
get your affairs in order and we will increase
the rate of withholding”. This plays into the
concept that budgeting allows you to lose
more of your meagre income and you will still
be ok. This is a complete fallacy. There indeed
may be a budgeting crisis in many Australian
homes, but it’s not in the homes of those on
Centrelink. It is in the McMansions on the
edge of capital cities where people are trying
to keep up with the Nguyens by borrowing
money to buy stuff they don’t need and then
not paying the bills they have to. Ironically
it’s not the poor who do this at all. We have
no lesser authority than Paul Clitheroe
(now the First Chair of Financial Literacy at
Macquarie University – but better known as a
TV finance commentator) who indicates “If
you want to find genuine financial literacy in
this country you go to the low income
families, not the high ones” (ABC 20/11/12).
When eating is reliant on whether or not you
have money, you learn about money quickly.
Financial Counsellors’ Concerns
Our mates in the financial counselling
industry know a thing or two about how
things really are in Struggle St and we note
here some of their concerns about Centrepay.
The first and in a sense most important issue
is which commercial organisations have
access to Centrepay. If you go back to the
Red Tape – SSRV Newsletter Volume 26
except we have on the front page from the
official brochure the last line in the first
paragraph indicates about a ‘Centrepay
approved organisation”. Now this is very
problematic. Because whilst (presumably
now) Prof Clitheroe is keen on the lower
income folks having financial literacy not all
of them do. Unfortunately the mystique of a
‘Centrepay approved organisation’ may lead
folk to think that the government approves of
them (and so that they must be a ‘good’
organisation). One has only to consider the
somewhat analogous relationship between
the Australian Securities and Investment
Commission (ASIC) and certain finance
companies that are no longer with us. It
appears that some people believed ASIC was
in some way a ‘watchdog’ over their money in
the same way the Australian Prudential
Regulation Authority does with banks. This is
not the case. ASIC checks that the finance
companies tell people of the risks of investing
with them, but are not responsible for the
finance companies. So when an organisation
tells its prospective customers that it’s
‘Centrepay approved’ this may give credence
where little if any belongs. The classic
example of this is white goods and furniture
rentals. Often these rental or leases cost the
consumer two to three times what they
would normally cost (FCA 22/11).
Indigenous clients (particularly those who
live in rural areas) have been victims of
Centrepay approved organisations that sell
them inflated funeral plans and furniture.
Some of these goods cost the people buying
them eight times the price they would
normally pay (Ibid).
Also, there’s no automatic cut-off with
Centrepay. So unless someone realises that
they have paid the sum off (and with eight
times the price, who could tell?) you could
keep on paying for a long time.
The other big issue is that no-one checks the
limits people can place on Centrepay. Far be it
for us to say that there’s anything to be said
that’s positive about income management,
but at least that is only fifty percent.
Issue 3
December 2012
Someone can actually put one hundred
percent of their Centrelink payment to be
deducted from Centrepay (ibid). Commercial
credit providers can have their recovery of
loans somewhat disallowed if they lend
people more than they believe they can repay.
For example repayments of thirty percent of a
person’s income is usually considered the
maximum allowable for a loan. Noting of
course that the payment of rent and bills is
different from loans, people still need money
for food, transport and the like. Thus there
needs to be a maximum percentage of a
person’s entitlement that can be assigned to
Centrepay, perhaps fifty percent. This might
force Centrepay staff to think about how
much someone who is already paying rental
and bills can really afford a shonky lounge
suite…
http://www.abc.net.au/am/content/2012/s3
636316.htm
FCA (22/11) Centrepay Review Welcomed
Media Release Financial Counselling
Australia West End Qld
http://financialcounsellingaustralia.org.au/C
orporate/News/Centrepay-ReviewWelcomed
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Epilogue
So whilst there are good reasons to have
Centrepay, there are very good reasons for it
to be reviewed, and the quality and legitimacy
of the creditors allowed access to the scheme
to be regularly reviewed.
If anyone wishes to contribute to SSRV’s
thinking for a submission to the review please
contact Dale Nelson via SSRV’s advice line
9481 0355 (or 1800 094 164) .
We hope all readers have a relaxed and warm
summer and wish them well for 2013.
References
Carr (11/11) Independent Review Of
Centrepay Media Release Minister for
Human Services 11/11/12
http://www.mhs.gov.au/media/media_releas
es/2012/11/12_nov_2012__independent_review_of_centrepay.php
Contact Us:
Centrelink (5/12/12) Centrepay Official
Brochure:
Phone: 9481 0355 or 1800 094 164 (outside
Melbourne and Geelong.
http://www.humanservices.gov.au/spw/cust
omer/publications/resources/co022/co0221203en.pdf
[email protected] / www.ssrv.org.au
Social Security Rights Victoria Inc.
ABC (20/11) Janda M, Australians need help
with financial literacy AM ABC Radio 20th
November 2012 (see next column for link)
Red Tape – SSRV Newsletter Volume 26
Issue 3
December 2012