Robodebt Class Action is Coming

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Centrelink sign

Centrelink will be contacting hundreds of thousands of Australians in the coming weeks to notify them that they could be part of a Robodebt class action lawsuit against the federal government.

About 13,000 people have already signed up to the class action, which is seeking to receive compensation for anyone issued with an unlawful debt, as well as repayment of the debt, and any interest charge.

The final total is unknown, and although those people who are part of the class action will forfeit their individual legal rights, they will be eligible for a share of any settlement or payout ordered by the court.

Robodebt ‘Unlawful’

The class action suit has been brewing for some time, but gained momentum after a law suit, brought by Victoria Legal Aid in the Federal Court last year determined that raising debts which relied solely on income averaging was unlawful.

As a result of the same case, the Federal Government stopped the practice it had been using since the system was introduced in 2015.

Robodebt (officially known as Online Compliance Intervention) has long been criticised for ‘debt-averaging’, whereby the software calculates a person’s average fortnightly income based on their annual tax return figure. The problem with the automated calculation is that it does not make allowances for those who work part-time or on a casual basis, or people who have seasonal jobs, or claim welfare payments for part of the tax year. Instead, it made assumptions, rather than taking into account pay slips and other evidence.

This resulted in tens, perhaps hundreds of thousands of people, being wrongfully issued with debt notices. They were then vigorously pursued to settle the debt, which continued to accrue interest while it remained unpaid.

Many people also complained of receiving notices with inflated debt figures based on incorrect calculations or misinformation within the system. Others, receiving payments such as Youth Allowance and Newstart, have been required to verify their income dating back as far as 2010, an arduous and sometimes almost impossible task. In some cases, Centrelink threatened to deduct money from a recipient’s current salary until the money had been repaid in full, and legislation introduced in 2016 bans anyone from owing Centrelink money from travelling overseas.

People ‘driven to suicide’

A lot of people accepted the debt notice and simply paid what was asked of them, while others who could not afford to pay were driven to depression or even the brink of suicide.

To add to the stress of debt recipients, Centrelink staff, inundated with questions, were not able to cope with the sheer volume of inquiries and complaints.

In December 2016, when Centrelink staff began tweeting the contact number for Lifeline so that people under financial duress could seek professional help from the 24-hour crisis support and suicide-prevention service, it started to become clear that a major crisis was unfolding.

But despite an audit of the system in 2017 resulting in thousands of debts being wiped or revised down, Robodebt was nevertheless defended by the Ombudsman as accurate “based on the information which is available to the department of human services at the time”.

And although the Government has made changes to the system over the years, it is still very much in use.

Seeking justice

Now, those Australians affected will have the opportunity to seek justice. The Government has been ordered to issue ‘opt out’ notices via letter, or MyGov, to anyone it believes may be eligible to be part of the class action. If these people don’t officially ‘opt out’ they will automatically be included.

According to information released by the Senate, more than 680,000 debts have been raised over the years, with a value of about $1.4 billion.

The next step in the class action is mediation, which is scheduled for June. If the case is not resolved, it will proceed to court later in the year.

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Sonia Hickey

Sonia Hickey is a freelance writer, magazine journalist, and owner of 'Woman with Words'. She has a strong interest in social justice and is a member of the Sydney Criminal Lawyers® content team. Sonia is the winner of the Mondaq Thought Leadership Awards, Spring 2022.

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