Legal advocates have accused Centrelink of letting companies exploit some of the country's most vulnerable via high-cost loans for fridges and TVs that they cannot afford.

Key points: Consumer law advocates have submitted a formal complaint with the Commonwealth Ombudsman

Consumer law advocates have submitted a formal complaint with the Commonwealth Ombudsman There are 14,000 retailers accessing Centrelink's Centrepay scheme who make $250 million annually

There are 14,000 retailers accessing Centrelink's Centrepay scheme who make $250 million annually The scheme's clients are often left in financial distress and are paying far more than the item's value

The Consumer Action Law Centre (CALC) has filed a complaint to the Commonwealth Ombudsman about the Department of Human Service's management of Centrelink's scheme Centrepay.

Centrepay allows people to set up automatic deductions to go out of their welfare payments, such as to pay rent or household bills.

It is accessed by 14,000 retailers, including so-called consumer lease providers like Radio Rentals.

"The department has some rules around the Centrepay system," CALC policy offer Patrick Sloyan said.

"They include things like you can't provide high-cost, low-value goods or you can't supply products that expose people to a risk of financial stress.

"We think consumer lease providers are breaching these and we want the department to act."

Every year, consumer lease companies make about $250 million through Centrepay.

Many of the companies' contracts have left people paying many times more the value of the items they have loaned.

Earlier this year, a Senate inquiry concluded that the industry deliberately structures its business to take advantage of poor and vulnerable people.

Northern Territory man Robbie Burrilil had a contract with a consumer lease company that he was paying off via Centrepay.

"I did all the paperwork and everything. I got loaned a laptop, Playstation 4, a big screen TV and a little speaker," he said.

"I was paying fortnightly about $190 a week."

Financial counsellors in the Top End are trying to educate locals about how expensive consumer leases can be. ( ABC News: Emilia Terzon )

Clients left in financial distress

Mr Burrilil said payments for the items on loan were coming out automatically until he lost some of the products and wanted to find out how to end his payments.

He said he had paid off about $4,000 by this stage — roughly the value of the items — but the company kept on asking him for more money to the tune of $12,000.

"I didn't know why this was happening," he said.

"I was worried. They gave me everything and I need to pay it off but I don't have money."

He has since cancelled his deductions.

Toni Cork, a Darwin-based financial counsellor, said many of her clients were from remote Indigenous communities and were in financial distress due to consumer loans organised via Centrepay.

The majority of her clients do not speak English as a first language, and Ms Cork believes many therefore do not understand the complex contracts or the fee structures they are getting into when they sign off for consumer leases.

Centrelink's Centrepay scheme is the subject of a complaint to the Commonwealth Ombudsman. ( AAP )

"We've seen up to $12,000 in rental contract debt," she said.

She believes there should be a cap on how much of somebody's welfare that consumer lease companies can access and that Centrepay has moved well beyond its original intentions.

"Centrepay wasn't set up so every man and his dog can take money off Centrelink recipients," she said.

"It was there to make it easier for clients and vendors to set up community housing so that rent gets paid. But it wasn't put there to allow consumer lease companies to access 30 per cent of somebody's money on non-essential items."

Half of company's revenue comes from people on welfare

CALC's complaint to the Commonwealth Ombudsman comes after it made 12 complaints about Centrepay directly to the department since late 2017.

"We think consumer lease providers aren't complying with the department's own rules," Mr Sloyan said.

In a statement, a spokeswoman from the Department of Human Services said it "strongly refutes any suggestion" that it is not managing Centrepay appropriately.

She added that people on welfare can stop Centrepay deductions at any time they want and that retailers that do wrong can have their Centrepay approval revoked.

Radio Rentals admitted to breaking national consumer laws last year but is still a Centrepay retailer. This year a Senate Committee heard the Department only removed a retailer from Centrepay in limited circumstances, including if the corporate regulator ASIC had removed its license.

Radio Rentals remains a Centrepay retailer despite admitting to breaking national consumer laws in 2018. ( Supplied )

"We wonder why consumer lease providers like Radio Rentals are allowed to be on the system, a government-administered system, when they're breaking the laws," Mr Sloyan said.

The same Senate Committee heard that half of all of Radio Rentals takings comes in from people on welfare via the scheme.

Tim Luce, the chief executive of Radio Rental's parent company Thorn Group, said it has taken many steps to improve Radio Rental's business model since 2018, including bringing in plain English contracts and boosting its hardship policy.

The company has also strengthened its internal resolution process and separated its marketing roles from commercial sales, he added.

The concerns about Centrepay come as laws first suggested in 2016 to tighten rules around payday lending and consumer leasing have stalled.

The SAAC laws would ensure consumers are not signed up to deals that cost more than 10 per cent of their income, and that customers on consumer leases could not pay more than the base price of a product plus four per cent of its net price per month.

In a statement, the Assistant Treasurer Michael Sukkar said the Federal Government is still considering the laws.

Meanwhile, Mr Burrilil is urging anybody considering a consumer lease to think twice.

"I will never do it again. Even my family, I tell them everybody: 'don't do it again'," he said.