A senior public servant charged with managing the robo-debt crisis in 2017 helped draft the Commonwealth Ombudsman’s report into the program, which he said was used by the government to defend themselves against negative press...
Royal Commission into the Robodebt Scheme
Robodebt royal commission demands answers of Probe Group’s $24 million collection contracts
Unfortunately named Probe Group which, won $24m in contracts from Services Australia, must now front the robodebt royal commission.
The Royal Commission into the Robodebt Scheme has roped in another debt-collection agency awarded hefty contracts by Services Australia during the time the illegal welfare shakedown program operated, as counsel assisting zeroes in on what the former human services secretary knew, was informed of and passed up the ministerial chain, including to Scott Morrison.
Executives from Probe Group, the debt collector at the centre of the original Federal Court case brought by Victoria Legal Aid that ruled robodebt demands illegal, will be grilled over the coming days as to how it sought to profit from the scheme, including commission structures used to reward collections.
The use of commission structures by collection agencies is an especially controversial element of the robodebt scandal because they effectively introduce an all-or-nothing incentive structure to recover funds that have been found to have been erroneously manufactured.
A critical question so far for collection agencies is to what extent they sought to verify that the debts were legitimate.
Collection agencies routinely buy debt from sellers for a fraction of their book value based on the estimated quality of the debt, usually the capacity of debtors to be found and to pay.
In the case of poor-quality debt, especially receivables that are generated by billing system errors or where there are duplicate bills, the price of the receivables is usually factorised down heavily, with so-called junk debt often being sold for a single cents in the dollar, if it can be sold at all.
Regulators in utility markets have also previously placed bans on the sale of so-called junk debt because of the high error rates and poor reconciliation that can then become public harm both in the illegitimated harassment of consumers and damage to their credit ratings.
The fact that Human Services was shifting what was clearly junk debt onto commercial recovery markets is a major reputational issue for both the government and recoveries market participants because it demonstrates a lack of quality control and governance of public sector receivables.
Probe Group, which was a major beneficiary of the robodebt scheme, inked debt-recovery contracts with Services Australia worth at least $24 million between 2016 to June 2023, although it is unclear how much of this was related to robodebt, a point the royal commission is likely to explore.
Six contracts were inked over successive financial years; however, one of the largest was revealed in August 2021 for $5.2 million between 27 July 2021 and 30 June 2023.
Around the same time, Probe Group’s contracts with the Australian Taxation Office appear to have fallen away with the last work awarded concluding in June 2019 according to procurement records.
While many details of debt collection contracts are commercial in confidence, it appears that agencies may have started to become wary of using debt collectors associated with robodebt due to the heavy criticism and questionable tactics being used by the illegal debt generation scheme.
A key question yet to be answered is to what degree senior bureaucrats sanctioned hardball collection tactics and whether these were being used as a deterrent to frighten people from claiming welfare benefits in their own right.
At the royal commission hearing on Monday, it was revealed that former Social Services ministers Scott Morrison and Marise Payne are expected to front the inquiry as witnesses on Wednesday and Thursday next week after more bureaucrats are interrogated as to what information was shared and with whom.
The biggest question is what former human services and social services secretary Kathryn Campbell shared up the line with her ministers about any problems or legal advice warning about how the fake debts were constructed and unleashed on the commercial recoveries market.
The royal commission again specifically referenced the level of Campbell's knowledge and communications as a point of further inquiry at the hearing on Monday.
The royal commission continues.
Back in 1997 a discussion took place at the NSW Public Accounts Committee which covered many aspects of debt collection The Public’s Debts to the State: BETTER AGENCY COLLECTION, Report No. 16/51 [No. 106] October 1997 HIGHER STATE REVENUE
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