The Australian Security and Investments Commission has permanently banned the clothing store Urban Rampage from using the government’s Centrepay system to sign up mostly vulnerable Indigenous customers to “inherently inappropriate” credit arrangements that place them at risk of financial harm.
Coral Coast Distributors – which operates 10 Urban Rampage stores in regional and remote locations across Western Australia, the Northern Territory and Queensland, selling household items – can no longer sign-up customers into Centrepay credit arrangements.
Asic found that those arrangements were unsuitable for consumers in Urban Rampage’s target market because they were unlikely to be consistent with their financial situation and placed them at risk of financial hardship.
The Asic commissioner, Alan Kirkland, said the unprecedented action should send a message to others using Centrepay in a way that causes financial harm to Indigenous Australians.
“This stop order sends a very strong message to others operating similar models,” he told Guardian Australia. “Where Asic sees credit arrangements that are causing serious harm to consumers … Asic will act and will act strongly.”
A Guardian Australia investigation has exposed deep problems with the Centrepay system, including its use to divert hundreds of thousands of dollars from welfare recipients to energy company AGL, and to help prop up a disgraced religious rehabilitation centre practising gay conversion and forced baptisms on highly vulnerable residents.
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Centrepay was established in 1998 under the Howard government as a voluntary bill-paying service for people receiving Centrelink payments to make automatic deductions for essentials like rent and utilities.
It currently has more than 620,000 users. A large percentage of them are receiving disability support payments. Almost a third are Aboriginal people, predominantly women, from remote areas, receiving jobseeker or parenting payments.
Over time Centrepay has expanded to include a range of businesses and services.
There are now more than 15,000 companies approved to access Centrepay, which facilitated 23.7 million transactions last year worth $2.7bn. Each transaction incurs a 99c fee, paid to the government by businesses using the system.
Over the past decade, consumer advocates have raised concerns that several of the businesses registered to access Centrepay may be causing financial harm to vulnerable customers.
The corporate regulator is investigating dozens of companies. At least four it has already penalised remain on the system.
Calls are mounting for a full review of the system to increase compliance, transparency and strengthen auditing processes.
Services Australia, which operates the system, says it is working towards improving delivery.
In 2022-23, contracts ended for 12 Centrepay businesses due to non-compliance.
The investigation also revealed that Asic had repeatedly tried to warn Services Australia about more than 100 companies approved for Centrepay use, but was left frustrated by the failure to remove them from the system.
Asic made the final stop order against Urban Rampage on Wednesday. It had issued an interim order in February, preventing it from entering into new Centrepay agreements. That order was in place for 21 days, before being extended while Asic made a final determination.
Asic found that Urban Rampage’s credit arrangements did not comply with Asic regulations and posed a “significant risk” of causing customers to suffer financial hardship.
“I accept that the making of a stop order will decrease the availability of credit to a class of consumers who will otherwise not have access to commercial credit. I am satisfied that any resulting negative effect upon competition in the financial system is outweighed by the need to protect vulnerable consumers from being issued with an unsuitable product which is inconsistent with their financial situation and which potentially increases the risk to them of financial hardship,” Asic delegate, Phillip Mines said in his decision.
Urban Rampage says it will appeal Asic’s “racist and paternalistic decision”.
A spokesperson for the business says it has instructed its lawyers to appeal to the Administrative Appeals Tribunal, and “potentially” launch a legal challenge under the racial discrimination act.
“Asic is running an inherently racist test case of its powers and using First Nations people as guinea pigs,” the spokesperson said.
“We have said from day one Asic has been acting in a racist and paternalistic way towards First Nations people, who are largely our customer base. In the remote communities we service, this looks like click and pay for whites only, no credit for black fellas. The question has to be asked if Asic will now ban other Centrepay retailers where the customers are predominantly white Australians,” Urban Rampage said.
“One only has to read Asic’s reasons – which we have made public – to see none of what they are saying makes any sense. There are no complaints and no findings of unconscionable conduct.
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“Yet Asic has banned Centrepay because it thinks our customers are stupid, can’t read, nor write and are incapable of making sound financial decisions,” the spokesperson said in a statement.
But one group of financial counsellors working with remote First Nations people have welcomed the permanent ban.
“We congratulate Asic for this progressive step, to first of all recognise the harm caused to First Nations customers by this credit free-for-all by Urban Rampage, and secondly, for carefully considering all the facts and then taking comprehensive action to stop it,” Bush Money Mob financial counsellor, Alan Gray, said.
Gray said he had seen the “laughably-flimsy credit assessments” undertaken by Urban Rampage, which did not even allow for other Centrepays for genuine commitments, such as rent, or electricity”.
“Any company that decides to barge its way to the head of the money queue to take people’s meagre Centrelink payments before they have money for food, petrol, rent, or electricity, should be quaking in their boots after today’s announcement,” he said.
Asic also rejected the characterisation of its ban as racist or paternalistic.
Kirkland said the corporate regulator had been approached by financial counsellors representing Indigenous Australians with concerns about Urban Rampage’s practices. The regulator’s earlier enforcement action – a temporary ban – was widely welcomed by Indigenous communities, he said.
“Addressing harm impacting First Nations communities is a key priority for Asic and we will continue to work with financial counsellors and First Nations advocates to identify instances where credit arrangements are causing financial harm.”
Asked whether Services Australia should be doing more to crack down on Centrepay misuse, Kirkland said:
“Asic and Services Australia have different roles. Our role is to oversee the provision of credit facilities. Services Australia administers the Centrepay register,” he said. “We are in close contact to make sure that we go about those roles effectively.”
Services Australia said it refers cases to ASIC and other regulators.
“We work closely with ASIC and other regulators and refer cases to them to investigate to ensure they meet legislative requirements, including consumer protection legislation,” a spokesperson said.
The government is also reviewing Centrepay and the spokesperson said they would have “more to say in the coming weeks” on the review.