Can the Cashless Debit Card evolve from being a blunt compliance tool?

David Tennant and Gerard Brody take a look at the somewhat murky evolution of the Cashless Debit Card scheme and what the future holds for it. 

In late October, a small but important change was made to the Cashless Debit Card (CDC), which controls how some people access social security payments. 

The Indigenous-owned, Northern Territory based Traditional Credit Union (TCU) became an issuer of the CDC. Until then, the only issuer was boutique financial services contractor, Indue Limited.

Ann Ruston, minister for families and social services, welcomed the TCU’s participation as a way to “increase banking services options for Cashless Debit Card participants in the Northern Territory”. 

Supporting Aboriginal and Torres Strait Islander involvement in the delivery of financial services is significant and positive. Allowing participants in some areas to select between two providers is still a long way from genuine choice however, with the CDC designed to reduce normal consumer rights and protections.

The Department of Social Services (DSS) states that the CDC is the same as any normal savings account with EFT access. The DSS also claim that participants are covered by “all standard consumer protection laws”. 

Do these claims tell the full story? The laws that regulate banking services in Australia suggest not.

The ASIC Act 2001 sets out the rules on unconscionable conduct and consumer protection for financial services. The CDC and tied savings account are financial services under the Act.

At least one existing ASIC Act protection was side-stepped to allow the CDC trials to proceed. The Commonwealth determined the locations that the card would operate and the categories of benefit recipients required to have one. 

The DSS supplied names and addresses of required participants to its commercial partner, Indue Limited. Indue set up accounts and sent the people identified by DSS a card with details on how to use it.

Section 12DL of the ASIC Act prohibits sending credit or debit cards unless consumers ask for them. The provision reduces the potential for push-selling and makes it more likely cards only go to those intended. There are some exceptions – like sending replacements for expired cards, although none applied in this case.

Indue asked ASIC for a ‘no action’ letter; basically a commitment the regulator will not take action on a breach of the Act. ASIC agreed, with its reasons including government’s policy decision, the trial nature of the approach, and Indue’s agreement to comply with the terms of the ePayments Code.

Government decided later to extend the trials, then declared them complete – meaning previously issued CDCs would continue with no defined end date. Questions about non-compliance with Section 12DL of the ASIC Act were raised during a 2020 Senate Inquiry into the extension of the Cashless Debit Card to the Northern Territory.

After that inquiry, the DSS made a fresh request for ASIC to excuse sending unsolicited cards. Apparently, DSS made the request rather than Indue to reflect an intention to expand the list of providers that could set up the accounts and issue the cards.

There was another important difference between this and the first request for relief in 2016. Cards were no longer being posted with the first letter. Instead, Indue now invited participants to arrange collection of their CDC, or to ask for it to be posted.

ASIC provided the second ‘no action’ letter, but concluded it was no longer required. In ASIC’s view, section 12DL is limited to sending cards, not issuing them. Compliance with the law has technically been achieved, but in a manner that feels more like a workaround.

There is another relevant section of the ASIC Act that helps assess whether the CDC is the same as any EFT account. Section 12DJ prohibits harassment or coercion in the provision of financial services. 

In the 2001 Federal Court case ACCC v The Maritime Union of Australia, Justice Hill concluded coercion “….carries with it the connotation of force or compulsion or threats of force or compulsion negating choice or freedom to act.”

The DSS says participants choose whether to activate the card. Choosing not to, locks away 80 per cent of their benefit income. The quarantined income accumulates in the participant’s account, but they cannot access or use it, effectively negating “choice”.

Government is not required to comply with the ASIC Act, so while coercive, the conduct is not illegal. The card issuer must comply with the Act but it is not coercing, merely complying with the terms of its service contract with the DSS.

Select benefit recipients in the Northern Territory can already choose whether to accept a CDC but not whether their benefit income will be managed under terms set by government. The choice is between the CDC or the government-issued Basics Card.

Now, those people also get to choose between the TCU and Indue if they opt for a CDC. While positive, this ‘choice’ is still nothing like freely selecting a savings account to suit your needs and means and using the funds how and where you want.

Government ministers continue promoting expansion of the CDC to most benefit recipients, which could involve over 2 million Australians. If the CDC is to become more than a compliance tool, options and choice will have to mean more than government taking away rights because it can, or providing a culturally-appropriate veneer to a fundamentally coercive policy.