Energy giant AGL deliberately designed an automated system that wrongly took money from the welfare payments of unwitting former customers and later said it was doing those customers a “favour” by providing refunds, a court has heard.
AGL is being sued in the federal court over its use of the government-run Centrepay system to wrongly take hundreds of thousands of dollars from 483 welfare recipients after they had ceased being its customers.
Guardian Australia has revealed in recent months that such conduct is more widespread across the energy retail sector.
Both Origin Energy and Ergon Energy have also used the Centrepay system to wrongly take money from the welfare payments of former customers. Origin is alleged to have wrongly received $2.5m from the welfare cheques of almost 3,000 ex-customers.
The federal government is now auditing the use of Centrepay by every energy retailer in the country and is conducting a broader review of the system. Preventing overpayments is a key part of that review.
The case against AGL is being run by the Australian Energy Regulator. It is alleging the company breached the law by using Centrepay to overcharge former customers without any attempt to notify them, refund the money, or cancel future Centrepay payments.
The company is defending the case, saying it cannot be held to have unlawfully overcharged the welfare recipients because it never directly asked for the payments. It has attempted to argue it was a passive recipient of money that continued to flow via Centrepay after a customer had left AGL.
Q&AWhat is Centrepay?
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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 that it has already penalised remain on the system.
In May 2024, the government announced 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.
In closing submissions on Thursday, the regulator’s counsel, James Arnott SC, said AGL had deliberately designed its fully automated payment processing system to continue to wrongly accept welfare money from customers it knew had paid their final bill in full and left the business.
AGL’s automated system, he said, would first attempt to allocate the money to another account under that person’s name.
If another account could not be found, the money would simply be held as a credit against the customer’s name to pay off some future bill that AGL “knew was never coming”.
The system did nothing to flag the overpayments for manual review by AGL staff, or take any steps to notify the welfare recipient, cancel future Centrepay deductions and seek to refund the money, Arnott said.
“What should have happened ... is that the system should have been identifying what is in effect an overcharge, and it should be doing something about it. It should be informing the customer.”
Arnott said it was not enough for AGL to simply say that it was a passive recipient of money being sent via Centrepay. It was obligated by law to not passively accept money which it should not have received, he said, particularly when that money was being diverted from the pockets of welfare recipients.
“Welfare payments are not extravagant and a recipient is unlikely to be able to afford having their money diverted into AGL’s hands as credit for a further bill that is never coming,” he said.
He described it as “confronting” that AGL’s system would have continued to wrongly take money from welfare recipients if not for the intervention of Services Australia, which issued the company breach notices alleging contraventions of the Centrepay rules. That prompted AGL to refund the money.
Arnott said AGL’s head of credit and affordability, Steven Horbury, had viewed the refunding of the money as a “favour” to welfare recipients.
Arnott referred to his earlier questioning of Horbury, stating: “You’re not really doing them a favour by giving them their money back.”
Horbury responded: “Well, we thought we were if they weren’t aware of it.”
Arnott said in his closing submissions to the court: “Now of course they weren’t aware of it. The system had been designed so that they weren’t told.”
Counsel for AGL, Stephen Parmenter KC, said in his closing submissions that the regulator’s case could not succeed because the law stated that overcharging must involve a demand for payment or bill.
AGL issued no such payment demand or bill that prompted the Centrepay payments, he said.
“Overcharging can’t occur when there hasn’t been a request or demand for payment.”
Parmenter said AGL had engaged in a remediation program to return the funds and it had been completed to the satisfaction of Services Australia.
The hearing concluded before Justice Kylie Downes on Thursday. Downes has reserved her decision.