ASIC cracks down on retailers using Centrepay, raising concerns over financial risk to vulnerable communities
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The Australian Securities and Investments Commission (ASIC) has stepped in to address concerns over a clothing retailer's credit arrangements with certain customers.
The regulator's actions are aimed at safeguarding vulnerable communities from potential financial harm, especially those relying on government benefits.
This move follows concerns that the retailer's credit offerings could lead to financial difficulties for customers, particularly when repayments are deducted directly from Centrelink income.
In a move that has sent ripples through the Northern Territory's retail landscape, ASIC has tightened its grip on the use of Centrepay, a bill-paying service that allows customers to pay for goods and services through deductions from their Centrelink benefits.
This crackdown has seen Indy C, a popular clothing store in Katherine, become the second NT clothing shop to lose access to Centrepay, following in the footsteps of the Urban Rampage chain.
For many of our readers who rely on Centrepay to manage their finances, this news may be concerning.
However, it's essential to understand what these changes mean for you and how they can impact your shopping habits, especially if you're accustomed to using Centrepay for clothing purchases.
Beverley van Wyk co-manages the Indy C store, located on Katherine's main street, where it has been operating for approximately 20 years.
‘Most of our customers—probably 90 per cent—are Indigenous, and they use this store as like a family store,’ she pointed out.
Ms van Wyk mentioned that many of her loyal customers come to Katherine from remote Aboriginal communities across the Top End and Big Rivers regions for various purposes, including purchasing clothing.
‘They can buy funeral clothes, they can buy clothes for their children, and they don't have to look for money when they come in,’ she continued.
Most of Indy C's sales were processed through the Centrepay system until ASIC issued a stop order. Ms van Wyk shared that her customers were unhappy with this change.
‘They come in every day asking, is it back? Have you got it back yet,’ she said.
ASIC stated that Indy C was exposing its customers to a ‘significant risk’ of financial harm.
The regulator expressed concern that many Indigenous customers were signing up for repayment plans that were unaffordable, leaving them with insufficient Centrelink payments to cover their basic living expenses.
ASIC highlighted that individuals with limited English proficiency and financial literacy were especially vulnerable to financial harm in this situation.
‘I accept that many of Indy C's customers find it practical and convenient to purchase goods from Indy C using [Centrepay],’ ASIC wrote in its stop order.
‘However, this does not negate the significant risk that some financially vulnerable customers will suffer financial hardship if they are issued with [Centrepay plans].’
Repayments were typically set at $50 or $100 deducted from each Centrelink payment, but customers could also have arrangements with other retailers for similar deductions.
On the other hand, Ms van Wyk insisted that her customers understood the agreements they were entering into.
‘Everybody that joins up, I always ask if they can afford it,’ she said.
‘We haven't had any problems with our customers not being able to afford what they're paying.’
‘We're here to help the people. We're not here to disadvantage them, and that's all we've done, is help,’ Ms van Wick added.
In addition to Indy C and the Katherine branch of Urban Rampage, three other clothing stores in the region continue to use the Centrepay system.
Kelly Gulliver, Manager of CatholicCare NT's Financial Counselling Team, noted that Katherine had been a focal point for financial counsellors due to the high number of Centrepay-approved retailers in the area.
‘That's a high concentration of clothing stores using Centrepay in a low-populated area,’ she stated.
‘We were having clients come into our office…every single day with four or five deductions to different clothing stores and needing emergency relief to buy food.’
‘People using Centerpay, they're on a very low income. They really shouldn't be going into credit to purchase clothes,’ Ms Gulliver continued.
The federal government has unveiled reforms that are expected to impact all Centrepay-approved retailers across Katherine and nationwide.
These changes will affect the way retailers use the scheme and could alter the landscape for businesses relying on this payment method.
‘Consumer goods, consumer leases and household goods will no longer be available to be deducted through Centrepay because we're seeing some real problems there,’ Government Services Minister Bill Shorten declared.
The new reforms will lead to appliance rental shops, which financial counsellors have criticized as some of the most exploitative businesses in the Centrepay system, being removed.
According to Ms Gulliver, the category of household goods will also cover clothing retailers, making them subject to the changes as well.
Alan Gray from Bush Money Mob, a financial counselling service focused on remote Aboriginal communities, praised the changes as an excellent reform.
‘This has been a scourge,’ he remarked. ‘It's been a horrific mistreatment of people.’
He mentioned that Centrepay initially served as an excellent service, allowing people to pay essential bills like rent and utilities while ensuring they knew exactly how much was left for food.
‘I despair when I think about the clothing businesses that have been mistreating remote Aboriginal people by targeting their clothing offerings to people from remote communities who have no spare cash,’ Mr Gray continued.
‘You think to yourself, “Why would a remote person living in poverty pay four or five times the going rate for a Bulls basketball singlet or a hoodie or a blanket.”’
‘The businesses will give people these clothing items on Centrepay a form of credit, and they can walk out of the shop that day, whereas they don't have the cash to go to equivalent big shops where the prices are five times lower,’ he added.
Urban Rampage is challenging ASIC's ruling at the Administrative Appeals Tribunal, with a hearing scheduled for late January.
Ms van Wyk stated that Indy C is also likely to appeal, and without access to Centrepay, she fears her business may have to close.
‘The takings are dramatically down, you know, because of Centrepay,’ she said.
‘If we haven't got the money coming in, what do we do? Do we close?’
Meanwhile, Ms Gulliver expressed concern over businesses relying on Centrepay for their financial viability.
‘It shows that they are targeting Aboriginal people to make profit and that that is their entire business model,’ she pointed out.
While Centrepay has long been a crucial financial tool for many Australians, helping them manage essential expenses, concerns are emerging about its potential misuse.
As businesses like Indy C face setbacks after being removed from the scheme, questions are being raised about its broader impact on consumers.
Some experts argue that Centrepay is inadvertently driving people into debt, with funds being diverted to businesses that may not be providing the services promised.
This situation calls for urgent scrutiny and reform to ensure the scheme doesn't harm those it's meant to support.
We at the Seniors Discount Club encourage you to share your experiences with Centrepay in the comments below. Have you found it helpful for managing your finances, or have you encountered issues with over-commitment? Your insights could help others navigate these changes and protect their wallets from unexpected financial stress.
The regulator's actions are aimed at safeguarding vulnerable communities from potential financial harm, especially those relying on government benefits.
This move follows concerns that the retailer's credit offerings could lead to financial difficulties for customers, particularly when repayments are deducted directly from Centrelink income.
In a move that has sent ripples through the Northern Territory's retail landscape, ASIC has tightened its grip on the use of Centrepay, a bill-paying service that allows customers to pay for goods and services through deductions from their Centrelink benefits.
This crackdown has seen Indy C, a popular clothing store in Katherine, become the second NT clothing shop to lose access to Centrepay, following in the footsteps of the Urban Rampage chain.
ASIC has instructed Indy C, a Northern Territory clothing retailer, to stop using Centrepay due to concerns about the financial risks it poses to vulnerable customers. Credit: Facebook / Indy C
For many of our readers who rely on Centrepay to manage their finances, this news may be concerning.
However, it's essential to understand what these changes mean for you and how they can impact your shopping habits, especially if you're accustomed to using Centrepay for clothing purchases.
Beverley van Wyk co-manages the Indy C store, located on Katherine's main street, where it has been operating for approximately 20 years.
‘Most of our customers—probably 90 per cent—are Indigenous, and they use this store as like a family store,’ she pointed out.
Ms van Wyk mentioned that many of her loyal customers come to Katherine from remote Aboriginal communities across the Top End and Big Rivers regions for various purposes, including purchasing clothing.
‘They can buy funeral clothes, they can buy clothes for their children, and they don't have to look for money when they come in,’ she continued.
Most of Indy C's sales were processed through the Centrepay system until ASIC issued a stop order. Ms van Wyk shared that her customers were unhappy with this change.
‘They come in every day asking, is it back? Have you got it back yet,’ she said.
ASIC stated that Indy C was exposing its customers to a ‘significant risk’ of financial harm.
The regulator expressed concern that many Indigenous customers were signing up for repayment plans that were unaffordable, leaving them with insufficient Centrelink payments to cover their basic living expenses.
ASIC highlighted that individuals with limited English proficiency and financial literacy were especially vulnerable to financial harm in this situation.
‘I accept that many of Indy C's customers find it practical and convenient to purchase goods from Indy C using [Centrepay],’ ASIC wrote in its stop order.
‘However, this does not negate the significant risk that some financially vulnerable customers will suffer financial hardship if they are issued with [Centrepay plans].’
Repayments were typically set at $50 or $100 deducted from each Centrelink payment, but customers could also have arrangements with other retailers for similar deductions.
On the other hand, Ms van Wyk insisted that her customers understood the agreements they were entering into.
‘Everybody that joins up, I always ask if they can afford it,’ she said.
‘We haven't had any problems with our customers not being able to afford what they're paying.’
‘We're here to help the people. We're not here to disadvantage them, and that's all we've done, is help,’ Ms van Wick added.
In addition to Indy C and the Katherine branch of Urban Rampage, three other clothing stores in the region continue to use the Centrepay system.
Kelly Gulliver, Manager of CatholicCare NT's Financial Counselling Team, noted that Katherine had been a focal point for financial counsellors due to the high number of Centrepay-approved retailers in the area.
‘That's a high concentration of clothing stores using Centrepay in a low-populated area,’ she stated.
‘We were having clients come into our office…every single day with four or five deductions to different clothing stores and needing emergency relief to buy food.’
‘People using Centerpay, they're on a very low income. They really shouldn't be going into credit to purchase clothes,’ Ms Gulliver continued.
The federal government has unveiled reforms that are expected to impact all Centrepay-approved retailers across Katherine and nationwide.
These changes will affect the way retailers use the scheme and could alter the landscape for businesses relying on this payment method.
‘Consumer goods, consumer leases and household goods will no longer be available to be deducted through Centrepay because we're seeing some real problems there,’ Government Services Minister Bill Shorten declared.
The new reforms will lead to appliance rental shops, which financial counsellors have criticized as some of the most exploitative businesses in the Centrepay system, being removed.
According to Ms Gulliver, the category of household goods will also cover clothing retailers, making them subject to the changes as well.
Alan Gray from Bush Money Mob, a financial counselling service focused on remote Aboriginal communities, praised the changes as an excellent reform.
‘This has been a scourge,’ he remarked. ‘It's been a horrific mistreatment of people.’
He mentioned that Centrepay initially served as an excellent service, allowing people to pay essential bills like rent and utilities while ensuring they knew exactly how much was left for food.
‘I despair when I think about the clothing businesses that have been mistreating remote Aboriginal people by targeting their clothing offerings to people from remote communities who have no spare cash,’ Mr Gray continued.
‘You think to yourself, “Why would a remote person living in poverty pay four or five times the going rate for a Bulls basketball singlet or a hoodie or a blanket.”’
‘The businesses will give people these clothing items on Centrepay a form of credit, and they can walk out of the shop that day, whereas they don't have the cash to go to equivalent big shops where the prices are five times lower,’ he added.
Urban Rampage is challenging ASIC's ruling at the Administrative Appeals Tribunal, with a hearing scheduled for late January.
Ms van Wyk stated that Indy C is also likely to appeal, and without access to Centrepay, she fears her business may have to close.
‘The takings are dramatically down, you know, because of Centrepay,’ she said.
‘If we haven't got the money coming in, what do we do? Do we close?’
Meanwhile, Ms Gulliver expressed concern over businesses relying on Centrepay for their financial viability.
‘It shows that they are targeting Aboriginal people to make profit and that that is their entire business model,’ she pointed out.
While Centrepay has long been a crucial financial tool for many Australians, helping them manage essential expenses, concerns are emerging about its potential misuse.
As businesses like Indy C face setbacks after being removed from the scheme, questions are being raised about its broader impact on consumers.
Some experts argue that Centrepay is inadvertently driving people into debt, with funds being diverted to businesses that may not be providing the services promised.
This situation calls for urgent scrutiny and reform to ensure the scheme doesn't harm those it's meant to support.
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