Centrelink Debt Recovery Mistake

In the wild, weaker members of the herd are targeted. It might be new-borns or aged animals – they offer easy gains to predators. In some species, these vulnerable members are protected by the herd, while in others, they are sent away to die because they’re slowing the group down. These aren’t deliberate actions. They come from pure instinct.

Human beings have evolved a bit beyond that, though you wouldn’t always know it by watching us. Either way, some of the most advanced societies have measures in place to look after our vulnerable citizens. In Australia, one of these measures is Centrelink. It’s a social security system that offers financial assistance to the struggling.

Some of the categories that benefit from Centrelink include elderly citizens, the unemployed, people with disabilities, marginalised citizens in remote areas, and sometimes, students. This financial aid is funded by tax payers, so once the recipient is back on their feet, they can pay it forward to other people in need.

Welfare is always a divisive issue. People who have bounced back from it are largely supportive, but many tax-payers worry that others may be misusing the system to leech on their hard-earned income. This is why welfare systems are routinely reviewed to weed out anyone who may be taking advantage and receiving pay-outs that they don’t deserve. Unfortunately, these clean-ups sometimes trap genuine people in their net.

This might be what prompted Centrelink’s robo-debt initiative. The idea was to automatically calculate people’s debts and automate their payment notifications. It was intended to make the system swifter and more efficient, allowing Centrelink to recover more funds that could then be redistributed to those in need.

Before robo-debt, human staffers would look through an automated comparison of welfare debts and tax records. By matching these two, they could tell who owed what, and who no longer needed their allowances. When the system pointed out unpaid dues, someone would manually countercheck and take necessary steps.

The new robo-debt system skipped the manual verification step. As soon as debt data was produced, a letter would be sent to the debtor with little to no oversight. In theory, it seems a lot more effective. It cuts down redundancies and saves time and money. Unfortunately, robo-debt ended up sending letters to a lot of people who shouldn’t have received them.

Between July 2016 and September 2017, robo-debt identified and notified 165,000 welfare debts. Out of those, 29,000 were found to be erroneous. A lot of these people received inaccurate and improper requests to pay money they didn’t owe, and that they had no way of paying. This caused them financial and psychological distress.

Because these letters were automated and didn’t pass through human eyes, they sometimes contained complex jargon that the recipients could make no sense of. Many people who received the letters were frustrated by the legalese, so they simply ignored the letters. Others had no way to respond, so they acted like they hadn’t received the letters.

Some letters went to wrong addresses, while others were deliberately shelved because the recipient didn’t have the documents to prove or disprove their financial status. The letters required bank statements and payslips that the recipient had lost or thrown away. At the end of that 14-month period, the robo-debt system quoted $350 million in debt, but Centrelink has only recovered $84 million.

During those 14 months, Centrelink reconciled its welfare allowances every two weeks. So if a welfare recipient got a letter and didn’t respond for any of the reasons above, robo-debt would automatically review those 26 reports to work out an average income.

This meant the recipient appeared to have been gainfully employed, and therefore lost their benefits while also being expected to repay 14-months-worth of debt. In many cases, external debt collectors were called in to reclaim funds weren’t owed in the first place.

All these discrepancies led to the robo-debt system being thoroughly scrutinised. Errors were identified and the 29,000 we mentioned earlier were re-assessed. 10,560 of these went down to zero, others were reduced, while others were surprisingly revised upwards. Overall, 1 in 6 debts against recipients of welfare were found to have errors.

Once again, views differ. Government officials place the onus on welfare recipients to supply accurate information and frequent status updates. Many citizens disagree, arguing that for those who had the financial means to pay off those debts, they would have paid without a second thought. After all, the government can’t be wrong about your debts …

The shadow minister for human services, Linda Burney, falls in this latter camp. She believes the government should apologise to the ten thousand welfare recipients whose debts were cancelled. They didn’t deserve that level of psychological distress when they were already having such a hard time of things.

On the other side of the fence, Hank Jongen defends the system. This spokesman for the Department of Human Services says they have always believed in flexible, fair, realistic debt collection policies. He believes online compliance systems like robo-debt help retain the integrity of the whole system.

Jongen quoted an ombudsman report by the commonwealth. The report criticises many areas of Department of Human Services’ debt collection policy. However, it states that it’s reasonable for the department to ask welfare recipients to clarify errors. The report agrees that this responsibility lies with the alleged debtor, and if the department was given timely, up-to-date information, they could accurately  calculate debts owed.

As the saga continues to unfold, Jongen confirms that while no letters were sent out over Christmas due to a ‘ceasefire’ in November, the harbingers of bad news would – and did – continue form mid-January 2018. However, this more careful approach is likely to reduce the volume of debt errors.