Chasing debts can be very profitable, especially during hard times.
As Australia’s economy slows to its weakest point since the GFC, and as government clamps down on unemployment and other welfare benefits, the billion dollar debt collection business is booming.
The federal government’s botched robo-debt scheme has proved to be particularly lucrative for the industry. More than $2 billion worth of so-called debt has been outsourced by the Department of Human Services to debt collectors since the scheme began in 2015 as part of a giant debt-chasing machine that has so far cost the government $534 million — almost as much as the amount of alleged “debts” the program has clawed back ($658 million).
One of those debt collectors is Panthera Finance, a little known Brisbane-based company that’s playing hardball in the collection game and entered the Centrelink debt collection business via it’s purchase of ARL Collect, which came with millions of dollars in Department of Human Services (DHS) contracts.
Among Panthera’s investors is the private equity group CPE Capital, which was founded by Bill Ferris and Joseph Skrzynski, two of Australia’s most seasoned and successful investors.
And for the last two decades, they’ve been joined by another director: former NSW premier and current National President of the Liberal Party, Nick Greiner, who brings unique “political insider” experience in the outsourcing of government services.
Panthera was the brainchild of 38-year-old twin brothers, Jamie and Mathew Hough, who pulled together a debt portfolio valued in the hundreds of millions after starting life in the industrial city of Wollongong, then working their way up decades later to the well-heeled Brisbane suburb of Pullenvale.
Their skill has been to buy the debts owed to a business at a fraction of their value, then apply their experience to collect as much as they can from the debtors.
After getting funding from CPE, Panthera bought ARL Collect, one of three debt collection companies awarded a contract in 2016 by the DHS, which administers Centrelink and the robo-debt automated debt collection service. ARL Collect has been awarded close to $10 million in robo-debt contracts.
By the time CPE made its play on Panthera, allegations were already circulating that automated robo-debts had been unfairly, possibly even illegally, raised against welfare recipients.
Government policy was clear: it was using robo-debt to raise $1.7 billion to repair the budget bottom line. Raising money from the least well-off in society served both a financial and ideological purpose for a government which declared it had little time for the so-called leaners of the world.
How those debts were raised was another matter. In July this year, the Australian Consumer and Competition Commission (ACCC) launched court action against Panthera, claiming the company’s behaviour was “particularly egregious” when it “unduly harassed” three consumers in 2015 and 2016 for payment of debts despite being advised that they were not liable for them.
In two cases, the ACCC claimed that Panthera placed an incorrect default listing on the consumers’ credit rating files and allegedly imposed “onerous requirements” on the consumers to prove they didn’t owe the debts. In one case, Panthera is accused of using coercion, making false representations and engaging in unconscionable conduct.
Over the last two years, around 100 people have complained to the ACCC about Panthera’s debt collection activities.
Panthera’s approach has also seen it fall out of favour with the National Australia Bank, who last year stopped dealing with the debt collection company, saying its priority is to “assist customers who fall into hardship by offering tailored solutions to support their circumstances, to get them back on their feet quickly”.
The second big player in the robo-debt collection game is Probe Group, a Melbourne outfit set up in 1978 by the Kagan Brothers, Jarrod and Rodney, which has won more than $15 million in robo-debt contracts from DHS since 2016.
Since 2018, Probe has been majority-owned by Five V, the boutique investment firm headquartered in Sydney’s Bellevue Hill, set up by Adrian Mackenzie, the private equity “maverick” who purchased half of the Packer family’s media assets in 2006, including the Nine Network.
In 2017, it was reported that Probe had contacted a Centrelink customer repeatedly, and pretended to be someone from DHS. Jarrod Kagan, Probe’s chief operating officer, told a Senate inquiry in 2017 that it would “never coach” anyone to take an aggressive approach, but admitted not every conversation was perfect.
The third player chasing Centrelink robo-debts, illion, has won more than $30 million in contracts from DHS since 2017. The former Dun & Bradstreet subsidiary is now majority-owned by Archer Capital — another private equity operator, whose key backers include the Future Fund, MLC and the Abu Dhabi Investment Authority.
How accountable is the debt collection industry for its behaviour in chasing robo-debts, given its contracts with the government are secret? Not at all, says Fiona Guthrie, chief executive of Financial Counselling Australia.
“You have to ask, what due diligence is the government doing to make sure all three companies are behaving appropriately? Are there checks and balances for identifying people who are extremely vulnerable?”
A spokesperson for the Department of Human Services said its use of debt collection agencies was “not new or unique” to the program and that it monitors closely the “performance, behaviour and debt collection processes of its external collection agents”.
Panthera, Nick Greiner and CPE all declined to comment on this story when approached by Inq.
Have you had experience with robo-debt? Send your thoughts to boss@crikey.com.au. Please include your full name for publication.
Hypothetical :- “You ‘accumulate’ a non-existent debt, you’re then set upon and harassed by debt collectors who have ‘bought’ that debt off the non-existent creditor (= a government that buggered up the ‘system’/’process’ in the first place).
“How much compensation are you entitled for the trauma that non-existent debt generated?”
Ah, this government and the company they keep…..
Klewso that’s a class action suit in the making..
Bring on the class action.
See where Count Orlok (the “responsible” Minister???) has called off his Centrelink vampires from chasing down these automaton-raised alleged debts?
On the “bright side(?)”, apparently in this “Nosferatu : Symphony of Horror” there’s only a “small cohort” had their incomes cookie-cuttered to underwrite the government’s surplus – at least that’s his countship’s story ….. he who “had(?)” shares in Metallum Holdings (—–> “Nimrod Resources”?) and “went to China on holidays” with Paul Marks, as a “(sort of) representative of the government” in 2014? …… Who also ran up a $38,000 bill (on us – at over a grand a month) for “data on his home computer”?
…… So how “small” is “small” Count?
And, 2013, was the recipient of two (one for the missus) of those 5 “fake Rolex” watches brought here by a Chinese billionaire in a plastic bag (“Excise = ????”) – the other three going to Abbott and his wife and one to Macfarlane (who valued his “fake Rolex” on Google – before Goodenough told him what it was really worth “declaring” as a gift : $40,000 rather than their declared $”300-400″)…. Talk about “Roberdebt”????
But, methinks the Count who can’t, was born again into the Evangelical personal love fest, that is also enjoyed by the Prime Minimal.
Having had dealings with both, Probe & Dunn & Bradstreet, in the last year or so, (not in connection with Centrelink) they’ve sunk to a level that I thought was only to be found in a Dickens’ novel..
There, in my situation was never a debt in the first place, it was a mistake by the power company in assigning a payment to a new account rather than my old account, but rather than sort it out, (I didn’t owe them any money, it turned out I was in credit) they sent it straight to the debt collectors, to me this, if I hadn’t chased it & got stroppy with the power company etc, could have been a complete & utter disaster for my credit rating.
I also found the people who were “collecting” the “so called outstanding debt” weren’t interested in rectifying the situation, they were a call centre in the Phillipines, they just got paid to harass people, which would mean real hardship for many, who would likely pay up just to stop the harassment & associated stress..
It took weeks to “fix” the situation, I finally said to them “sue me for the money, I don’t owe”, the fact that it was such a small amount (under a 100 dollars) meant it gave me enough time to sort out the situation with the power co…
Also anything under a couple of hundred dollars isn’t worth their while chasing in court, they have also got to prove that the person actually owes this amount which is an expensive process, which is why they use these call centres to harass the unfortunates that aren’t so familiar with consumer law…
The debt collectors realised I knew more about Australian consumer law than they did, so they left me alone after this, I checked with the power company concerned to make sure it had been sorted out, so it didn’t still sit on my record..
The Australian govt needs to make tougher laws to protect those that are vulnerable in these situations, as too many companies are handing “so called debt” over to these collection agencies when that isn’t the issue, but because their too lazy to comply to consumer Law, or actually sort out what has gone wrong…
They’ll just put it in the debtors pile, to be farmed out to these scumbag collection agencies, because there aren’t enough stringent laws currently in place to prevent this from happening..
There should be a system where all Debts which are being sold off by any company to any other sleazy company must be registered and the affected person is informed with 21 days to solve or sort out the mess.
With today’s computer world this would be a simple process. it would also give the “client” warning and time to act on the information.
Ken T that’s a brilliant idea, it’s so simple in its genius, it would cut out the stress all round.
It is a contrast in the way the government chases the so called Robo debts and the way the Coalition Government ignores the abuse of employers in the stealing of workers wages or evasion of taxes.
Touche, Frank. It is just toooo hard for this government to pursue global corporations for a fair share of tax revenue, or to pursue Australia’s super-rich to their Cayman tax havens. Just toooo hard!!
And what about those Aussie and global companies that just find it toooo complicated to follow wage laws, while having no problem setting up tax avoidance schemes sooo complex that even a forensic accountant can’t unravel them.
Our government – of malice, for malice, by malice.
”In my opinion”, These “not doing anything illegal leeches“ are basically working for the LNP to bleed welfare recipients, specifically to build Morrison’s token ‘Surplus’. The punishment of sinners is a satisfying collateral bonus for the self righteous in the LNP.
What also seems to be interesting is that of the 3 collection agencies, they all have people wiyh Liberal Party ties.
Then we have the cashless welfare card whereby the federal government is paying a company with National party ties, 10% of all the people being stuck on this system.
And so, I suppose no one is surprised that we have slipped from 5 on the Transparency International rating of ethical and transparent to 27 and still slipping.