Remote retailers warn businesses could 'collapse' when federal Centrepay crackdown takes effect
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Several Northern Territory retailers say their businesses will not survive if they are banned from using a controversial Centrelink payment system, ahead of a federal crackdown expected to take effect in coming weeks.
Centrepay is a system used by more than half-a-million Australians that allows people to pay for goods and services through deductions from their social security payments.
It was introduced as a way of paying essential bills like rent and power, but has expanded over time to be used in shops selling clothes, whitegoods, phones and speakers.
Under changes to be rolled out by the federal government, retailers selling those "household items" are now set to be booted from the scheme, along with funeral companies and some food providers.
The reforms follow a series of controversies, including two NT clothing stores being ordered to stop using the service over concerns they were putting their mostly Aboriginal customers at financial risk by signing them up to debts they did not fully understand and could not afford.
The Albanese government announced sweeping changes to the service in December last year, with former minister Bill Shorten saying Centrepay had been "misfiring" and "not working as intended".
"Some services being provided through Centrepay were really not appropriate for the vulnerable people on the government's systems," he said at the time.
The reforms are expected to only apply to new businesses at first, with existing Centrepay-enabled businesses in categories slated for removal to be given more time to phase out their use.
Three of them have said their businesses will go broke without access to the scheme.
Urban Rampage, a chain with stores across remote northern Australia, told a tribunal last year an Australian Securities and Investments Commission (ASIC) order to stop using Centrepay would cause its business to "collapse" and its staff to be terminated.
Makalu Fashion, another Centrepay-enabled clothing retailer, has been trading on Katherine's main street for about two years.
"I don't think my business can survive if Services Australia completely stops Centrepay," owner Dinesh Lamichhane said.
Mr Lamichhane said while he agreed with stricter regulations, he did not want to see Centrepay taken away altogether.
"There should be tighter rules," he said.
"I do not hesitate to say this system really encourages the businesses to misuse the money of the Aboriginal customers."
But he said Centrepay was also "really important" to his customers as a budgeting tool.
"[The] majority of customers, they have the habit of not saving the money in their pocket," he said.
"That's why if Centrepay exists, it is really helpful for them to buy their necessities, especially their clothing items and footwear."
Mr Lamichhane said he believed retail businesses should only be able to draw down a maximum of $50 a fortnight from Centrelink, and customers should only be able to enter into a Centrepay agreement with a single retailer so they did not end up with multiple deductions.
"I think Services Australia can easily do that," he said.
Kimberley-based Bush Money Mob counsellor Allan Gray said he had no sympathy for retailers that were financially dependent on Centrepay.
He said many stores were charging "massive prices to remote Aboriginal people who are living below the poverty line".
"I have literally seen hundreds of remote Aboriginal people ripped off by abuse of Centrepay by greedy businesses," he said.
"If you live by the sword, you die by the sword."
However, Mr Gray said he was concerned shops would turn to other forms of credit, like Afterpay or direct debit systems, which could still see financially vulnerable customers ending up with big debts.
He said while recent tightening of laws that govern buy-now-pay-later services meant advocates had a better chance of protecting customers, they had not removed the risk.
"It feels a bit like Whac-A-Mole," he said.
"I have no doubt that if someone is greedy and they're determined … [they will] find a new way to take the limited income from remote Aboriginal people, but we now have far more tools at our disposal."
Vennessa Poelina, a community advocate and Nyikina traditional owner from Broome, said she had seen many remote Aboriginal people get into trouble with Centrepay debts to clothing retailers.
She said shopkeepers had an obligation not to abuse the trust of Aboriginal customers from remote communities who often "don't know how to question" the payment options presented to them.
"The [shopkeeper] will go 'oh look, we can take money out of your account, you don't have to pay the whole $80!," she said.
"That's how I think people started to get hooked into that system of Centrepay."
Mr Shorten said in December the changes to Centrepay would be "fully introduced" by July 1 this year.
But Services Australia has since confirmed the plan has been delayed, with more details on the changes to be revealed "in the coming weeks".
A spokesperson for the Urban Rampage chain of clothing stores said the "ongoing delay" was creating a regulatory limbo for its business.
The company is challenging an ASIC order to stop using Centrepay at the Administrative Review Tribunal, in a move that could prove futile if the changes go ahead as planned.
The spokesperson confirmed Urban Rampage was offering customers other payment options in the meantime, including Afterpay and direct debits.
By James Elton
Centrepay is a system used by more than half-a-million Australians that allows people to pay for goods and services through deductions from their social security payments.
It was introduced as a way of paying essential bills like rent and power, but has expanded over time to be used in shops selling clothes, whitegoods, phones and speakers.
Under changes to be rolled out by the federal government, retailers selling those "household items" are now set to be booted from the scheme, along with funeral companies and some food providers.
The reforms follow a series of controversies, including two NT clothing stores being ordered to stop using the service over concerns they were putting their mostly Aboriginal customers at financial risk by signing them up to debts they did not fully understand and could not afford.
Allan Gray says he has no sympathy for retailers that are financially dependent on Centrepay. (ABC News: Andrew Seabourne)
The Albanese government announced sweeping changes to the service in December last year, with former minister Bill Shorten saying Centrepay had been "misfiring" and "not working as intended".
"Some services being provided through Centrepay were really not appropriate for the vulnerable people on the government's systems," he said at the time.
The reforms are expected to only apply to new businesses at first, with existing Centrepay-enabled businesses in categories slated for removal to be given more time to phase out their use.
Shops say they face 'collapse', job losses
In Katherine, there are five clothing stores using Centrepay, which financial counsellors have previously described as a "high concentration" for a town of its size.Three of them have said their businesses will go broke without access to the scheme.
Dinesh Lamichhane says while the rules should be tightened, Centrepay can also be "really important" as a budgeting tool. (ABC News: James Elton)
Urban Rampage, a chain with stores across remote northern Australia, told a tribunal last year an Australian Securities and Investments Commission (ASIC) order to stop using Centrepay would cause its business to "collapse" and its staff to be terminated.
Makalu Fashion, another Centrepay-enabled clothing retailer, has been trading on Katherine's main street for about two years.
"I don't think my business can survive if Services Australia completely stops Centrepay," owner Dinesh Lamichhane said.
"There should be tighter rules," he said.
"I do not hesitate to say this system really encourages the businesses to misuse the money of the Aboriginal customers."
But he said Centrepay was also "really important" to his customers as a budgeting tool.
"[The] majority of customers, they have the habit of not saving the money in their pocket," he said.
"That's why if Centrepay exists, it is really helpful for them to buy their necessities, especially their clothing items and footwear."
"I think Services Australia can easily do that," he said.
Urban Rampage has claimed an ASIC stop order amounts to discrimination against its First Nations consumers. (ABC Alice Springs: Chris Murrkarany Fitzpatrick)
Advocates welcome changes
The reforms have been cautiously welcomed by financial counsellors.Kimberley-based Bush Money Mob counsellor Allan Gray said he had no sympathy for retailers that were financially dependent on Centrepay.
He said many stores were charging "massive prices to remote Aboriginal people who are living below the poverty line".
"I have literally seen hundreds of remote Aboriginal people ripped off by abuse of Centrepay by greedy businesses," he said.
"If you live by the sword, you die by the sword."
He said while recent tightening of laws that govern buy-now-pay-later services meant advocates had a better chance of protecting customers, they had not removed the risk.
"It feels a bit like Whac-A-Mole," he said.
"I have no doubt that if someone is greedy and they're determined … [they will] find a new way to take the limited income from remote Aboriginal people, but we now have far more tools at our disposal."
Vennessa Poelina, a community advocate and Nyikina traditional owner from Broome, said she had seen many remote Aboriginal people get into trouble with Centrepay debts to clothing retailers.
"The [shopkeeper] will go 'oh look, we can take money out of your account, you don't have to pay the whole $80!," she said.
"That's how I think people started to get hooked into that system of Centrepay."
Mr Shorten said in December the changes to Centrepay would be "fully introduced" by July 1 this year.
But Services Australia has since confirmed the plan has been delayed, with more details on the changes to be revealed "in the coming weeks".
A spokesperson for the Urban Rampage chain of clothing stores said the "ongoing delay" was creating a regulatory limbo for its business.
The spokesperson confirmed Urban Rampage was offering customers other payment options in the meantime, including Afterpay and direct debits.
By James Elton
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