Without proper reform Robodebt could happen again, says new legal research

The travesty of a Robodebt-style debt recovery scheme could be repeated at any government level and jurisdiction in Australia if current practices are left unabated, says new research into consumer protection laws.

University of Melbourne academics have concluded that government debt collection is still causing harm to Australians from all walks of life.

In a recently issued study, researchers say despite all the scrutiny and condemnation Robodebt received, private firms continue to undertake vigorous collections activity on behalf of public agencies, with consumer advocates expressing ongoing concern that “government agencies’ debt collection strategies continue to cause unnecessary distress and hardship”.

The study points to large federal government departments, such as the Australian Taxation Office and Services Australia, as well as state and territory government agencies and even local government authorities enthusiastically pursuing debt.

“Australia’s general consumer protection laws apply to professional debt collectors and to all businesses attempting to recover debts in their own right, as creditors,” the paper says.

“Australian government agencies are not bound by these laws and there is some uncertainty regarding the extent to which debt collectors are bound by them when acting for government clients.

“Nonetheless, government agencies are subject to their own specific legal obligations when pursuing debts, including the obligation to act as ‘model litigants’ in any proceedings against debtors.”

In recent decades, the study notes that Australian public agencies have increasingly adopted the practices of the private sector when recovering debts owed by individuals.

“Since at least 1996, some Australian Commonwealth, state and local government bodies have outsourced debt collection activities to private firms, with financial incentives in place to maximise debt recovery,” it states.

“Though widespread, this practice attracted little scrutiny until the commencement of the Royal Commission into the Robodebt Scheme in 2022.”

Post-doctoral research fellow with Melbourne Law School Lucie O’Brien said despite the findings of the Royal Commission and the condemnation of the scheme by the current Federal Government, too many current debt-collection actions are causing real harm, especially to people who are already struggling.

“The Albanese Government rightly condemned the Robodebt scheme as a ‘gross betrayal and a human tragedy’,” Dr O’Brien said.

“But federal, state and local government agencies are still using heavy-handed tactics to recover debts.

“This problem affects almost everyone – people who are out of work, pensioners, veterans, taxpayers, families with children in daycare and small-business owners.”

Dr O’Brien and her team pointed to evidence that many government agencies are still using inappropriate methods to recover debts.

“Services Australia (which includes Centrelink) is still causing distress with vague and intimidating debt notices,” their report says.

“When people try to contact Centrelink for more information they face long wait times and sometimes can’t get through at all.

“In July and August 2023, only 23 per cent of calls to Centrelink were answered, with the rest either abandoned by the caller or cut off with a pre-recorded ‘congestion message’.

These waiting times have been reduced somewhat since those statistics were recorded.

“The Australian Taxation Office (ATO) has been repeatedly criticised for its aggressive debt collection tactics,” Dr O’Brien said.

“In March 2024, the Commonwealth Ombudsman pointed to the ATO’s recent ‘debt awareness campaign’ as an example of ‘what not to do’.”

At the state government level, the researchers highlight the NSW Government being accused just this month of ‘hounding’ business owners to repay micro-business grants issued during the COVID-19 pandemic.

“We need much stronger action to prevent another Robodebt,” Dr O’Brien said.

“Currently, there are very few legal safeguards to protect people when they are pursued for a debt by the government.

“Public agencies should be required to treat people fairly and with dignity.

“We need an overarching legal framework requiring government agencies to be consistent, transparent and ethical when collecting debts in the name of taxpayers, and consumer advocates must be adequately funded to help people understand their rights and to help them challenge their alleged debts when government agencies make mistakes.

“It is deeply concerning that even after Robodebt, community legal centres with expert knowledge in this area are being forced to cut back their services due to inadequate funding.”

Acknowledging that the Albanese Government had made some “important changes” in response to the Robodebt Royal Commission, Dr O’Brien warned that “much more” needs to be done to make sure current debt collecting practices across all levels of government never reach that point again.

“Without ambitious reforms, there is a risk the catastrophe of Robodebt could be repeated,” she said.

“The risk is especially acute for the most disadvantaged Australians.”