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Consumer Choice

We have concerns that forcing welfare recipients to receive and spend their benefits on a certain card will adversely affect their consumer choice. By limiting their ability to pay with cash or restricting their shopping choices to certain stores, those on the card may be put in situations in which they cannot shop at budget or discount stores, or at cheaper venues such as fresh produce markets. As an example, we understand that existing recipients of the BasicsCard are unable to shop at Aldi as that retailer does not have a separate register for alcohol sales. This is a problem for those on the BasicsCard system as Aldi is often the cheapest retailer and therefore their best option. Similarly, fresh produce markets are also a cheaper option than mainstream retailers, but often do not have EFTPOS facilities and only accept cash. A welfare recipientrestricted to an EFTPOS card for his or her purchases would not have the option of shopping at these places.

Inappropriate Merchant Behaviour

Income management methods such as the proposed Healthy Welfare card and the current BasicsCard can encourage inappropriate merchant behaviour, giving them the opportunity to profit from a consumer’s desire for flexibility in how they spend their money. Past examples of this sort of behaviour have been found, where businesses would sell goods to a welfare recipient with a BasicsCard, then buy the goods back immediately for cash (for slightly less than had just been paid)1. Behaviour of this kind could result in reducing the financial resources and capabilities of already vulnerable low-income persons.

Similar problems can arise with legal but exploitative businesses, such as those offering consumer leases on household goods. These leases are regulated by consumer credit laws, but are exempted from some of the consumer protections that apply to other forms of consumer credit (for example, disclosing the total cost of credit). Consumer leases can be an extremely expensive way to purchase a product, with the total payments over the term often being three to five times higher than the retail price of the goods, and being far more expensive than a high-interest credit card.2 Commonly the contracts also impose early termination charges should the consumer wish to return the lease goods.

Businesses of this kind have previously taken advantage of payment systems designed for beneficiary recipients, such as the Centrepay system. They have also been known to target indigenous communities.3 Despite being a form of consumer debt, these businesses construct contracts as leases so as to secure repayment through Centrepay. Other forms of consumer credit are not permitted to use the Centrepay system. We are concerned that businesses will establish themselves to take advantage of income received on the Healthy Welfare card, in a similar way to consumer lease providers’ use of Centrepay. This could be done, for example, through establishing recurrent payment mechanisms or direct debits on these cards. Given that the Healthy Welfare card will signify a low-income and perhaps vulnerable consumer, the prospect of businesses targeting these vulnerabilities is significant.

Technological Limitations

Finally, Consumer Action has doubts that the technology required to implement this plan as detailed in the Review exists. For example, current EFTPOS technology doesn’t permit the segregation of purchase items as required by the Review.

A full copy of our submission is available by clicking: The Forrest Review and the Healthy Welfare Card.