AGL’s use of Centrepay not audited for two years despite allegations it wrongly took $700,000 from vulnerable Australians

Exclusive: Services Australia says it is also working to retrieve overpayments from Queensland’s Ergon Energy

The energy company AGL was warned it was taking money from the welfare payments of former customers, and was sent daily updates on the transactions being made on the company’s behalf via the government debit scheme Centrepay, but failed to take steps to stop more than $700,000 in wrongful deductions, court documents allege.

Guardian Australia last week revealed serious problems with Centrepay, a system that allows businesses to take early deductions from a person’s welfare payment before it hits their bank accounts.

The energy regulator has accused AGL of receiving more than $700,000 from the welfare payments of vulnerable Australians who had ceased being AGL customers years before.

Services Australia has also confirmed it is working to retrieve overpayments made via Centrepay to a second energy company, Queensland’s Ergon Energy, prompting concerns the problem may be widespread.

Court documents in a federal court case against AGL show both AGL and Services Australia were aware of the significant risk that the welfare payments of former AGL customers were still being docked. The energy company was directly warned of “serious non-compliance” in 2013 after Centrepay was found to be sending AGL money from the welfare payments of former customers.

AGL told Services Australia in 2013 it had reviewed its use of the system and fixed the problem.

The documents show AGL was receiving daily reports from Services Australia for a six-year period about the identity of its Centrepay users from 23 December 2016 until 14 October 2021.

The reports included the customer’s names, their AGL account numbers, how much was being taken from their welfare payments and whether the amounts were to pay for electricity and gas, including payment reference numbers.

In the same period, despite the daily reports, AGL allegedly received more than $700,000 in overpayments from about 575 vulnerable Australians after they ceased being AGL customers.

The court documents allege that AGL did not take proper steps after the 2013 warning to cancel deductions when customers stopped using AGL energy.

That allegedly included failing to set up systems to generate reports for the cancellation of deductions or to inform departing customers that they should contact Services Australia to cease their Centrepay deductions.

It also allegedly failed to implement “any policies instructing staff members to cancel or request the cancellation of deductions when closing or making inactive a customer’s account”.

The energy regulator also says AGL had no system to ensure customers were notified of overcharges made via Centrepay or have them refunded within the required timeframe.

“As a result of the overcharges the affected customers did not receive welfare payments in the amounts that they were entitled to receive from Services Australia; and had less income than they were entitled to have to meet their living expenses,” the court documents allege.

“[The customers] had a portion of their welfare payments diverted to the AGL entities when the AGL entities had no right or entitlement to those funds.”

AGL has denied the allegation that it did not take proper steps to stop overpayments via Centrepay. The company says it had no authority to control deductions and “from time to time” informed customers when they closed their AGL account to notify Services Australia.

“From time to time, albeit not on a systematic basis, a customer was informed when they closed their account with the relevant AGL entity that they should notify Services Australia and cancel their Centrepay deductions,” AGL said in documents outlining its defence.

The company also says it did not “positively assert” the customers owed them money and says it took steps from 2014 to review accounts for customers that had been closed and had a credit.

It also says the daily reports on Centrepay payments often contained inaccurate information and were “not labelled and were unintelligible to a human reader without reference to a separate document that identified information set out in the various data fields”.

An AGL spokesperson previously said it had taken immediate steps to remediate the problem and had received “no benefit from these overpayments”. All the affected customers had now been refunded, the spokesperson said.

“AGL promptly reached out to Services Australia, the administrator of this payment service, to ask them to cancel the deductions and facilitate refunds to those impacted,” the spokesperson said.

“Since becoming aware of the issue AGL has engaged with Services Australia on a remediation program aimed at improving its processes.”

A Services Australia spokesperson, Hank Jongen, said overpayments occurred usually when customers moved and did not “actively manage their Centrepay deductions”.

“We have always supported businesses to return any overpayments facilitated through Centrepay, and we will continue to do so,” he said. “We acknowledge there are improvements needed to Centrepay to ensure it meets the needs of our customers – this is why the agency has commenced priority work and consultation to reform Centrepay policy.”

“We’re committed to seeing this process through and won’t be providing further comment on individual businesses regarding Centrepay policy or compliance while it’s underway.”