Class action against the debt recovery program will go ahead despite the government overhauling the scheme

Nearly 10,000 people have now signed up to join a class action demanding compensation over the botched robodebt scheme, almost twice as many as were on board when the government ditched the most controversial aspect of the scheme last year.

Law firm Gordon Legal said in November that it would push ahead with a class action against the debt recovery program, despite the government announcing an overhaul in the face of a federal court decision that critics argued meant the entire scheme was “unlawful”.

James Naughton, a principal lawyer at Gordon Legal, said 9,600 people had now registered to take part in the class action, up from about 4,000 in November when the firm confirmed it had lodged writs in the federal court.

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“There is growing interest and we’re contacted every day by more people who are finding out about the class action,” he said. “There are many, many thousands of people who have been affected and many thousands of people are now signing up.”

The class action could potentially place a further financial burden on the government, which has also been forced to review debts issued using the controversial income-averaging method heavily criticised by the federal court.

Last year, as it settled the separate challenge from Victoria Legal Aid, the government said it would only issue debts where it had gathered evidence of the income earned by welfare recipients, rather than simply averaging a person’s annual income across 26 fortnights.

Gordon Legal has said it is pursuing the class action despite the government’s backdown, given that Centrelink has not promised to return the money taken from its clients nor promised to provide compensation for inconvenience and distress.

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And the firm maintains it will still seek compensation even if Centrelink agrees to fully refund affected customers, and it is also claiming interest on “the money taken unlawfully from people, including through garnishing their tax returns”.

When the scheme was at its height, Centrelink had applied a 10% recovery fee to more than 250,000 debts and claimed $22m by garnisheeing the tax returns of welfare recipients from 20,000 robodebts last financial year, according to new data provided to the Senate.

While the majority were Newstart debts, the figures reveal Centrelink also swiped $180,000 from the tax returns of disability support pensioners from a total of 124 debts and $618,780 from the 595 debts belonging to single parents.

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The government has declined to say how many people or debts could be drawn into the saga, though Centrelink staff have been told more than 220,000 debts may be affected. Services Australia has frozen debts on payment plans as it reviews them.

Last year Services Australia said as of June it had banked $1.9bn in recouped overpayments, with about $700m that had already been paid back by welfare recipients. Nearly 700,000 debts had been issued at an average of about $2,ooo each.

Under Australian class action law, the court will define a “class” of people who are eligible to be involved. All people who meet the definition will be considered part of the class action unless they opt out.

The government is expected to file a reply to the class action in the coming weeks ahead of case management hearing next month.