A debt collector recently awarded a $3.3 million contract by the Department of Human Services (DHS) to chase money for Centrelink is wholly owned by a company being sued by Australia’s consumer watchdog for a raft of coercive and unconscionable practices.

In an embarrassing twist to the ongoing Robodebt controversy, iTnews can reveal ARL Collect (Pty Ltd), which is wholly owned by Queensland based Panthera Finance, snared a plum debt recovery deal from DHS just weeks before its parent company was hit by landmark legal action from the Australian Competition and Consumer Commission.

The ACCC’s case against Panthera accuses the firm of coercing payments from people – including identity fraud victims – for bills they did not actually owe.

The direct ownership link between the two companies, which technically are separate legal and financial entities, raises fresh questions around the adequacy of vetting and due diligence surrounding government outsourcing deals, especially those dealing with vulnerable people.

“Undue harassment”

The ACCC’s action against Panthera, lodged in the Federal Court on 24th July this year, sets out an appalling litany of allegations related to undue harassment and coercion, unconscionable conduct and false and misleading representation to consumers.

They include forcing money from identity fraud victims by using credit default listings as leverage and follow consumer complaints made about Panthera.

According to Department of Finance records, DHS published notification of the $3.3 million ARL Collect contract on 29th July; however the contract period is listed as running from 1st July 2019 to 30th June 2020, indicating the tender was let prior to commencement of action by the ACCC.

The ACCC’s allegations against Panthera, ARL Collects’s owner, all stem from commercial recovery actions, namely attempts to collect on contested bills issued by utilities AGL, Origin Energy and Telstra, raising serious questions of governance and corporate culture.

A particularly embarrassing coincidence for the government and DHS is that all the examples put forward to the court by the ACCC in its allegations arise from payment demands made by Panthera for bills that were not actually owed and actively disputed by those hit by recovery actions.

The revelations that the ultimate owner of DHS’s contracted debt collector is a current target of regulatory action is another headache for the government as it vigorously defends its data matching-reliant enforcement regime.

A class action now in the works against Robodebt being mounted by Gordon Legal also broadly makes its case along the lines of an unreasonable burden of proof being foisted on people labelled debtors, while organisations claiming to be creditors get away with questionable claims.

The Department of Human Services, its minister Stuart Robert and Prime Minister Scott Morrison have steadfastly maintained welfare overpayment recovery mechanisms are subject to due administrative process, a stance that has done little to quell criticism of Robodebt, which has now become a political weapon.

Irrespective of the politics, the ACCC’s case against Panthera is highly significant because it spotlights the poor conduct of some collection agencies. It also reveals how receivables ledgers of questionable data accuracy are on-sold and the way legitimately disputed debt is treated.

And it goes deep into the hardball culture and often high pressure tactics of the darker corners of the collections industry, a sector that has been struggling to reform its image.

Incomplete data and the burden of proof

A core element of the ACCC’s action against Panthera is the unreasonably high burden of proof foisted onto consumers to disprove an alleged debt.

A critical allegation in the ACCC case is that Panthera broke the law because it used “undue harassment” stemming from “repeatedly pursuing payment from each of the consumers, and continuing to require onerous documentation from each consumer after they had informed Panthera of the basis on which they were not in fact liable for the debt being pursued”.

It comes down to what organisations which claim to be owed money are willing to hear, especially if it costs them money.

The ACCC’s allegations against Panthera, and the examples it sets out, illuminate a whatever-it-takes mentality, where victims of inaccurate data fed into a deficient system are hounded and coerced until they cough-up.

ACORN, police reports disregarded

In one of the examples, a Queensland woman anonymised as “Witness A” disputed a $378 debt for an Origin electricity bill racked up under her name for an address in New South Wales where the woman had never lived. She had also never been a customer of Origin.

After filing a complaint with the Australian Cybercrime Online Reporting Network (ACORN) and supplying Panthera with the case reference number the debt collector still pursued her.

“Witness A again informed them that she had never lived in NSW, she had provided an ACORN reference number and stated that she had never received Centrelink payments in her life, referring to the Centrelink deductions recorded on the Origin bills provided to her,” the ACCC court documents state.

“Witness A provided Panthera with the details of the person the police had informed her was responsible for the Origin Debt, including that the person still resided at the NSW premises to which the electricity was supplied, and also with the relevant police officer’s contact information,” the ACCC’s court documents continue.

Despite this, Panthera continued asking her for information she just did not have, the ACCC alleges.

Witness B

In another case a man dubbed "Witness B" told Panthera that he believed a Telstra mobile broadband account created in his name had been fraudulently obtained. Despite a police officer telling Panthera that she was “looking into fraud” in relation to the account “the man still had a credit default listed against his name.”

What came next borders on extortion.

“On 4 April 2017, a Panthera representative called Witness B’s financial advisor and stated that Panthera was aware of Witness B’s dispute and was investigating it, offered to negotiate a payment in order to secure the removal of the default listing and represented that Witness B would need to make a payment of $100 to Panthera in order for the default listing to be removed,” the ACCC’s court documents state.

“This was in circumstances where the Panthera representative knew that Witness B’s account was in the process of being ‘written off’ by Panthera, but also knew that Witness B needed the default listing removed quickly because he was trying to obtain finance.”

Even after paying the $100 and Panthera telling the man the default listing had been removed “as at September 2018 Witness B’s credit file still contained a default listing with respect to the Telstra Debt”.

Public vs private debt

While the laws governing consumer protection and welfare payments are covered by separate acts, the ACCC case illuminates what appears to be a growing disparity between what the government mandates as acceptable conduct in the private sector compared to the treatment of its own clients.

The basis of the Gordon Legal class action against Robodebt is that DHS uses a knowingly flawed process to arrive at many of its overpayment assessments and consequent ‘debts’.

The law firm contends that these allegedly often flawed assessments then require an unfair and unreasonable burden of proof to disprove before money can be clawed back.

Glaringly, this is essentially same kind of behaviour the ACCC’s case against Panthera is seeking to stamp out on the basis of consumer detriment. The irony is doubled by the fact that the government is essentially prosecuting the same kind of behaviour it stands accused of knowingly allowing.

In the event the Federal Court hands the ACCC a win against Panthera – and it’s unlikely to lose – Robodebt’s growing army of opponents and survivors will be legitimately able to ask why the bureaucracy is spared the same regulatory rod the government applies to corporates.

This said, there are important distinctions between the receivables of Robodebt and those of commercial and consumer debt.

Default settings

A big one is that welfare or tax debts cannot be linked to consumer credit ratings that have historically based on defaults from unpaid utility, credit card and phone bills, as well as personal loans and mortgage arrears.

One reason the two are kept separate is that it’s questionable as to whether receivables like Robodebt are really debt at all, given there is no contract to enter into a credit agreement or make payments bound by a contract.

Rather, Robodebt hunts for what Centrelink’s analytics software guesses are overpayments based on information from the Australian Taxation Office that has an accuracy ratio of roughly 80:20, a level the government maintains is the system working as intended.

So rather than extending credit that is defaulted against, the government is seeking to rein-in and recoup overpayments in legitimate welfare benefits, with recipients of the overpayments typically being characterised as cheating, freeloading or sponging off the state.

The bludger pantomime

But within the bureaucracy, many quietly have serious doubts that Centrelink’s giant compliance octopus is doing a good job at either a service delivery or policy level.

A persistent observation raised privately within the Canberra machine is that Robodebt is essentially becoming a “bludger bashing” pantomime that feeds off entrenched systemic inefficiency that is the real cause of revenue leakage.

The most efficient way for the government to garner the savings Robodebt supposedly achieves is simply to get payments right in the first place, many believe.

A former senior public servant told iTnews a common trap was that the optics of fraud detection and enforcement were more attractive than quiet but more effective fraud prevention measures. The problem was, there was no “perp parade” for the cameras.

Questionable benefits

The cost of mounting recovery actions, such as the $3.3 million contract awarded to Panthera-owned ARL Collect, only add to entrenched inefficiency that arises from an overly complex and overcomplicated hairball of benefit entitlements and structures, others say.

These were spelled out in both the Abbott government’s Commission of Audit and McClure review of the welfare system that recommended a simplification and reduction of programs and mechanisms that often trip people up as they attempt to navigate the labyrinthine welfare system.

There is also quietly growing concern that the growth of Robodebt is creating perverse incentives and a distortion of purpose, namely that DHS, Centrelink and their minister are becoming fixated on collecting money when their role is to distribute it accurately, fairly and efficiently.

The use of other agency data to feed Robodebt’s brutally simplistic ruler running, specifically income data from Tax, has prompted that agency to publicly distance itself from any active involvement in the scheme.

Credit industry sources have also suggested to iTnews that the entry of Centrelink into the receivables market could act to push up the price of collections because of an increase in demand for a relatively limited set of services.

Unlike commercial and consumer debt ledgers that are sold to debt recovery businesses, because debts referred to collection from Tax and Centrelink can’t be used in credit scoring a strong incentive to pay promptly is removed.

Centrelink’s receivables are regarded the hardest to collect in the market because clients of the giant welfare agency are by definition on very limited incomes. Rounding up that money is also a job very few public servants want to undertake, arguably creating the shortfall outsourcers are used to fill.

What personal data collection agencies are able to access, either from the government or other sources, is also not been very clear.

Human Services responds

A series of questions were put by iTnews to the Department of Human Services surrounding Panthera’s ownership of ARL Collect last week, including whether Human Services was aware of ARL Collect’s ultimate ownership by Panthera or complaints against it.

We also asked whether regulatory action against companies or their owners had an impact on procurement decisions either pending or already awarded.

In an emailed response to iTnews’ questions, Department of Human Services general manager, Hank Jongen said the “the department does not have a commercial relationship with the company Panthera Finance Pty Ltd” but added DHS “does have commercial arrangements with a number of other companies for the provision of certain debt recovery services”.

“The department makes procurement decisions in accordance with the Commonwealth Procurement Rules,” Jongen said, noting that DHS “contracts have clauses and conditions applied to them, which include behavioural standards.”

“If the department became aware of issues with the performance or conduct of the contracted providers, the department would take appropriate action.”

Panthera says DHS knew of ACCC action

When asked what steps were taken to inform clients of the regulatory action against it, the Panthera's chief executive Richard Kennerly told iTnews the company was up front.

"When the ACCC notified Panthera of its action, we were highly proactive and notified all clients and other stakeholders, as well as ARL and the Department of Human Services were notified," Kennerly said in an emailed statement.

Kennerly also confirmed ARL Collect was wholly owned by Panthera Financial.

Panthera staff did not work or subcontract on the ARL Collect Human Services account Kennerly said.

Reputational write-off

A possible motivation for commercial recovery agencies increasingly chasing government receivables is that banks have become increasingly picky in how they shift traditional debt ledgers to collection agencies.

The Australian Financial Review this month reported that NAB stopped using Panthera in 2018 because the two organisations’ values did not align.

The Commonwealth Bank of Australia and ANZ Banking Group were also scrutinising collection agency tactics after retail banks were put through the mill at the recent Royal Commission.

At the same time, banks across Australia have tightened consumer lending criteria in response to the wider regulatory crackdown that exposed a range of questionable lending practices, a squeeze that has seen the proliferation of buy-now, pay-later services seeking to fill the void.

Bank apps, like those that allow people to more easily schedule regular payments for bills, are also likely making a dent into liquid receivables from utilities and services providers as consumers get better at managing their finances through spending trackers.

More broadly, there’s a trend away from plastic credit services, with ME Bank just last week junking a credit card platform rollout.

Those factors all add up to a leaner environment for collection agencies, with the quality of debt ledgers becoming more problematic as payment system efficiencies speed up.

Robodebt on borrowed time?

While the government might defend its overpayment recovery apparatus in the face of a class action, a more nuanced and transparent system that has better data inputs in terms of accurately measuring income could go a long way to taking the heat out of automated assessments and recoveries.

The Commonwealth Bank is one institution that is pushing hard to give its customers more convenience and control over their interactions with government, estimating that as much as $10 billion a year is being left on the table in terms of unclaimed government benefits.

The CBA’s Benefits finder uses a blend of APIs, AI and machine learning to ferret out entitlements for its customers and it’s no secret the ATO is keen as mustard to have real-time visibility over earnings to maximise both its take and efficiency of collection.

There are also substantive government moves that could pull the plug on the controversial program.

The abrasive user experience of the automated program is unlikely to escape the scrutiny of those looking to build Service Australia as Canberra tries to imitate the success of NSW.

Belly of the beast

Centrelink’s $1 billion Welfare Payments Infrastructure Transformation project, which Prime Minister Scott Morrison said last month was “the biggest ICT program we have seen in the public service” and was making “extraordinary progress” must arguably deliver tangible improvements relatively soon.

Morrison used the same speech to the Australian Public Service to demand “a step change in service delivery” from public servants and labelled payments transformation “a beast of a thing.”

Many of those on the receiving end of Robodebt would agree with that last statement.

In the event the ACCC wins its case against Panthera, there may well be another beast inside the welfare machine the government needs to tame.