The Federal Government will introduce changes to Centrelink's controversial debt recovery program, despite insisting it is working and dismissing calls for its suspension.

Key points: Thousands of Australians are incorrectly told they have outstanding debts

Thousands of Australians are incorrectly told they have outstanding debts "I have had to borrow money off my parents," a disability pensioner says

"I have had to borrow money off my parents," a disability pensioner says Welfare recipients can launch internal review of payments before debt proceedings are launched

The automated program — which compares Centrelink and Australian Taxation Office records — has issued 170,000 notifications since July with thousands of Australians incorrectly told they have outstanding debts.

After weeks of public criticism, Human Services Minister Alan Tudge has told his department to ensure welfare recipients can launch an internal review of their payments before debt proceedings are launched.

Disability pensioner Justin Burns last week told the ABC he disputed his debt and requested a review, but was still being forced to pay $40 a fortnight from his pension to repay the debt while the review was underway.

"I have had to borrow money off my parents, I have had to borrow money off my friends," he said.

"I thought, 'Holy, you know what, I don't believe I owe this money at all'."

Mr Tudge will also ensure Centrelink clients are informed of discrepancies in their accounts before being contacted by debt collectors.

"One of the issues has been that on some occasions, the address that Centrelink has on file hasn't been updated, so the first a person might hear about this is when there is a debt collector on their doorstop," Mr Tudge told 2GB radio on Monday.

"We are fixing that problem by ensuring that we use multiple different addresses, including a person's electoral roll address, to ensure they do get that letter and do get that opportunity to update their records."

Letters will now be sent by registered mail so Centrelink can track whether they have been received.

In some cases, the letter will be followed up with a phone call.

One client told the ABC they were contacted by debt collector Dun and Bradsheet about a $3,836 discrepancy, despite never being contacted by Centrelink.

Mr Tudge has also called on his department to simplify its language and ensure a contact number is printed on all notification letters, rather than being listed online.

Changes 'a stunning admission': Burney

Mr Tudge told the ABC last week the Government would retain the program and rejected reports it was flawed.

"The system is working and we will continue with that system," he said.

"I'm not aware of individuals who are completely convinced that they don't owe money but have been given a debt notice."

Coalition ministers and the Department of Human Services have said the program has identified close to $300 million in overpayments to welfare recipients.

Labor's shadow human services minister Linda Burney said the changes were a "stunning admission" given Mr Tudge's earlier claim the system was working.

"The system must be suspended until changes to make it fair are applied to everyone — that means those currently paying disputed debts should have the review completed before they are forced to pay," she said.

"After weeks of denial, the Minster has finally admitted what everyone else already knows — there are serious problems with the robo-debt program."

'There's been little to no training': Wilkie

The Commonwealth Ombudsman has launched an investigation into the Centrelink program and the National Audit Office is considering its own investigation.

Independent MP Andrew Wilkie wrote to the Ombudsman on Monday, claiming Centrelink staff had told him that clients were feeling suicidal and let down by the system.

"There has been little to no training regarding the debt recovery program," he said.

"Officers have been discouraged from looking too closely at complex cases and have been managed out of the debt recovery if too many questions are asked."

In a statement, Human Services spokesman Hank Jongen said an increase in referrals to social workers was related to family and domestic violence, rather than the debt recovery program.

"There have been no procedural issues with social workers being available," he said.

Mr Wilkie said there was a high demand for social workers and Centrelink staff were encouraged to focus on quantity rather than quality in public interaction.

"Officers are given a quota of six to 10 debt notices a day and encouraged by senior departmental staff to compete with each other for the highest quota," he said.

Mr Jongen said staff undertaking debt reviews had been given extra training and dismissed Mr Wilkie's claim there were quotas.

"Staff have not been instructed to raise six to 10 debt notices per day as part of this measure," he said.

"However, as part of our normal practice we do have service standard targets for dealing with debts as quickly as possible, which may include overtime.

"It would appear these two processes have been confused."

Last week, the ABC revealed that Centrelink management had ordered frontline staff not to process disputes and to instead refer welfare recipients to an online portal.

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