Australia agrees to record A$475 million payout to victims of illegal debt-recovery scheme

[SYDNEY] The Australian government said on Thursday (Sep 4) it had agreed to pay a further A$475 million (S$399.4 million) in compensation to victims of an illegal welfare debt-recovery programme, which, if approved by the courts, would be the largest class-action payout in the country’s history.

The programme, known as “Robodebt”, chased hundreds of thousands of welfare recipients for false debts calculated by a faulty automated algorithm between 2016 and 2019, until a court ruled it illegal.

A government royal commission inquiry found that Robodebt pushed vulnerable people into further debt and caused multiple suicides.

The latest settlement brings total government repayment and compensation costs to A$2.4 billion, and ends what is regarded as one of Australia’s worst-ever public administration scandals.

Robodebt victims and law firm Gordon Legal originally brought the class-action suit in 2019. The government settled the case in 2020, agreeing to pay more than A$720 million in unlawfully claimed debts, A$400 million in unlawful demands and A$112 million in compensation to 400,000 people.

Plaintiffs appealed the case after new evidence was uncovered during the government inquiry.

“Settling this claim is the just and fair thing to do,” Attorney-General Michelle Rowland said in a statement on Thursday.

The statement said that if the compensation is approved by the courts, it would be the largest class-action settlement in Australian history.

Peter Gordon, senior partner and founder of Gordon Legal, welcomed the settlement, which could rise to A$548 million with legal and administration costs.

“Today is a day of vindication and validation for hundreds of thousands of Australians afflicted by the Robodebt scandal,” he told reporters.

Felicity Button, a Robodebt victim and one of the lead applicants, said there was a “bittersweetness to it, thinking of the people that have had irreparable damage happen” as a result of the scheme.

The Robodebt programme was designed to ensure welfare recipients were not under-reporting income and over-receiving government payments.

But computer algorithms for the scheme wrongly calculated that hundreds of thousands of Australians owed money and, with little to no human oversight, recovered A$1.76 billion.

Robodebt was a failure of public administration, a “crude and cruel mechanism, neither fair nor legal”, that made many people feel like criminals, and caused at least three known suicides, the government inquiry found.