People pursued by Centrelink over its controversial "robo-debts" are being denied the protection of Australian consumer law, a Parliamentary inquiry has been told.
The welfare agency is exempt from laws and guidelines covering debt collection by private businesses, "even the much maligned banks", according to the chief executive of Victorian community organisation Family Care, David Tennant.
But Centrelink says that it, and the private sector debt collectors hired to pursue its clients, are compliant with legal requirements.
Mr Tennant, who has a background in consumer law, says much of Centrelink's activities in pursuing its millions of dollars in "robo-debt" would be illegal if done by a non-government player.
The legal immunity enjoyed by Centrelink allows it to "pressure people for payment in ways that are objectively unfair," Mr Tennant says in his submission to the Parliamentary inquiry into the robo-debt crisis.
The inquiry is part of a broader political and public backlash against the controversial recovery effort that the government hopes will recover up to $4 billion that has been overpaid to Centrelink clients going back many years in some cases
In his submission to the inquiry, Mr Tennant, a former chairman of the national peak body for financial counsellors, say he is surprised by the "lack of commentary about how Centrelink's conduct stacks up against the normal rules applying to the collection of debts in Australia".
"There are significant problems associated with a government department pursing a course of action that would likely be illegal if adopted by a body other than government," Mr Tennant wrote.
"It potentially erodes the confidence of those who rely on the benefit system to treat them fairly, or to recognise them as having the same rights as all citizens.
"It could also frustrate industry groups from large creditors and commercial collection agents, to small businesses, that observe government being able to pressure people for payment when they are not allowed to do so, in ways that are objectively unfair."
Mr Tennant wrote that the agency, as a government body not considered to be engaged in business activities, is not bound by the Australian Consumer Law, which protects the right of people being targeted for debt collection.
Nor do the guidelines maintained by Australian Securities and Investment Commission and the Australian Consumer and Competition Commission apply to the welfare agency.
"In other words Centrelink is not bound by the rules that apply to every consumer creditor and collection body in Australia – even the much maligned banks," the Family Care chief executive wrote.
Centrelink spokesman Hank Jongen rejected the criticism.
"Collection agents contracted by the department are required to comply with the ASIC/ACCC Debt Collection Guidelines," Mr Jongen said in a statement.
"The department undertakes debt recovery of Commonwealth funds on behalf of the Government in accordance with legal requirements."
One of Mr Tennant's key criticisms - that debts are being pursued even when it is under review - has been already been addressed by Human Services Minister Alan Tudge, who has pledged that debt collectors will not be sent in while appeals are underway.
But Mr Tennant believes Centrelink should voluntarily sign up the the ASIC/ACCC code of conduct and he wants the law amended so that it covers the agency's activities.
"Centrelink could opt to be bound by incorporating the debt collection guidelines into its service standards or operating procedures," he wrote.
"Far better still the law could be amended to require compliance for Centrelink and all government collection activities."