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.
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