Australia’s financial regulator has ordered a Northern Territory clothing retailer, Indy C, to stop using bill-paying service Centrepay over concerns it was exposing vulnerable Aboriginal customers to financial risk.
It is the second clothing NT clothing shop to have the service removed, after the Australian Securities and Investments Commission made the same call on Urban Rampage earlier this year.
The service lets customers pay for goods and services over time through deductions from their Centrelink benefits.
It comes as the federal government announces sweeping changes that will result in appliance rentals and sellers of “household goods” being removed from the scheme in July next year.
‘We’re here to help the people’
Beverley van Wyk co-manages the Indy C store on Katherine’s main street, where it has traded for about 20 years.
“Most of our customers — probably 90 per cent — are Indigenous, and they use this store as like a family store,” Ms van Wik said.
She said many of her regular customers travelled to Katherine from remote Aboriginal communities across the Top End and Big Rivers regions for various reasons, including to buy clothes.
“They can buy funeral clothes, they can buy clothes for their children, and they don’t have to look for money when they come in.”
Most of Indy C’s sales went through the Centrepay system until the Australian Securities and Investments Commission (ASIC) made the stop order.
Ms van Wyk said her customers were not happy with the change.
“They come in every day asking, is it back? Have you got it back yet,” she said.
‘Significant risk’
ASIC says Indy C was putting its customers at “significant risk” of financial harm.
The regulator said it was concerned Indigenous customers were signing up for repayments they couldn’t really afford, leaving them with Centrelink payments that would not be enough to cover basic living expenses.
People with limited English and financial literacy were particularly at risk, ASIC said.
“I accept that many of Indy C’s customers find it practical and convenient to purchase goods from Indy C using [Centrepay],” ASIC wrote in its stop order.
“However, this does not negate the significant risk that some financially vulnerable customers will suffer financial hardship if they are issued with [Centrepay plans].”
Repayments were usually set at $50 or $100 taken out from each payment. But customers could also have Centrepay arrangements with other retailers.
Ms van Wyk said her customers well understood the deal.
“Everybody that joins up, I always ask if they can afford it,” she said.
“We haven’t had any problems with our customers not being able to afford what they’re paying.”
“We’re here to help the people. We’re not here to disadvantage them, and that’s all we’ve done, is help.”
Hotspot on the radar
Besides Indy C and the Katherine branch of Urban Rampage, there are three more clothing shops in the Top End regional centre that are still using the scheme.
Kelly Gulliver, the manager of CatholicCare NT’s financial counselling team, said Katherine had long been on the radar of financial counsellors because of its high concentration of Centrepay-approved retailers.
“That’s a high concentration of clothing stores using Centrepay in a low-populated area,” Ms Gulliver said.
“We were having clients come into our office … every single day with four or five deductions to different clothing stores and needing emergency relief to buy food.
“People using Centerpay, they’re on a very low income. They really shouldn’t be going into credit to purchase clothes.”
Federal reforms
The federal government this week announced reforms that would have ramifications for all the remaining Centrepay-approved retailers in Katherine, and around the country.
“Consumer goods, consumer leases and household goods will no longer be available to be deducted through Centrepay because we’re seeing some real problems there,” Government Services Minister Bill Shorten told reporters in Canberra on Monday.
The move means appliance rental shops, which financial counsellors have long labelled the most exploitative merchants in the system, will be kicked off.
Ms Gulliver said the household goods category would also include clothing retailers.
Alan Gray from Bush Money Mob, a financial counselling service that works in remote Aboriginal communities, said the changes were an superb reform.
“This has been a scourge,” he said.Retailer claims ASIC ban is having ‘disastrous’ impact on First Nations customers
A lawyer for a homewares chain says the removal of a credit payment option is paternalistic and offensive to the vast majority of First Nations customers who have had no problems with the service.
“It’s been a horrific mistreatment of people.”
He said Centrepay had begun as a brilliant service for people to pay their essential bills such as rent and power, and then know exactly how much they had leftover for food.
“I despair when I think about the clothing businesses that have been mistreating remote Aboriginal people by targeting their clothing offerings to people from remote communities who have no spare cash,” he said.
“You think to yourself, ‘Why would a remote person living in poverty pay four or five times the going rate for a Bulls basketball singlet or a hoodie or a blanket”.”
“The businesses will give people these clothing items on Centrepay a form of credit, and they can walk out of the shop that day, whereas they don’t have the cash to go to equivalent big shops where the prices are five times lower.”
Considering options
Urban Rampage is appealing ASIC’s decision at the Administrative Appeals Tribunal, with a hearing set to be held in late January.
Ms van Wyk said Indy C was also likely to launch an appeal.
Without Centrepay, she said her business would likely have to close.
“The takings are dramatically down, you know, because of Centrepay,” she said.
“If we haven’t got the money coming in, what do we do? Do we close?”
Ms Gulliver said it was concerning if businesses were reliant on Centrepay to be viable.
“It shows that they are targeting Aboriginal people to make profit, and that that is their entire business model,” Ms Gulliver said.
I do wish the people that write these stories would use a proofreader before publishing them