Wed Sep 7

Eliminating cashless debit cards is great, but the government must be careful about what it does next

Written by Mirella Atherton, Lecturer in Law, University of Newcastle

The Albanese government will keep its election commitment to abolish ^[1] the cashless debit card. Cashless cards limited the financial autonomy of over 17,000 participants, a disproportionate number of whom are First Nations people.

The cashless debit card represents a payment partnership that has linked the welfare system with the banking and financial services sector. The aim of the card has been to police how welfare recipients spend social security benefits.

The card emerged from prior policies of compulsory income management and reduces access to discretionary cash by permitting spending only on certain items.

The new government is right to abolish the cashless debit card. The card is incompatible with the fundamental principle of informed choice in financial services. Even worse, this system imposes financial control that is inescapable, dehumanising and discriminatory.

History of financial discrimination

The Senate stolen wages inquiry ^[3] of 2006 noted a history of discrimination against Aboriginal and Torres Strait Islander workers and wage appropriation that spanned the 19th and 20th centuries.

Multiple submissions to that inquiry attributed ^[4] poverty experienced by First Nations people to this history of stolen wages and other monies, where governments sought to control the lives of Aboriginal people by making them wards of the state or otherwise placing them under the power of “protectors ^[5]”, Aboriginal Protection Boards or similar government institutions.

These institutions nominally held the wages and other entitlements of Aboriginal workers in trust (as Aboriginal people were not considered capable of managing money). But the moneys were frequently not paid, used for other state purposes, or stolen by “protectors”.

The inquiry noted evidence that governments were negligent ^[6] in their administration of the misappropriated wages of First Nations people.

Despite this history, governments in recent years have implemented policies with clear links to wage control programs of the past. Compulsory income management and cashless debit card systems have been implemented with the justification ^[7] that these systems reduce violence and harm associated with alcohol, gambling and drug use.

The cashless debit card is introduced

A trial of the cashless debit card commenced in 2016. By 2021, it had extended to multiple sites ^[9], as identified by the Department of Social Services. This latest form of income management has been applied disproportionately to First Nations people and has gendered outcomes for women.

The cashless debit card has not encouraged saving and instead has entrenched poverty. AP

Research ^[10] into the experiences of Aboriginal women subject to income management in the Northern Territory revealed that it was stigmatising. It also restricted women’s freedom of consumer choice and did not improve women’s capacity to care for their children.

The cashless debit card scheme echoes the overtly paternalistic motivations of earlier government efforts to control the incomes of Aboriginal people.

For example, the 1912 Maternity Allowance Act ^[11] declared “Aboriginal natives of Australia” were ineligible to receive benefits. Aboriginal women were often expressly excluded ^[12] from receiving such payments when they were introduced, and later subject to the appropriation of those benefits by government or missions.

The use of a cashless debit card system - as with similar historical examples - is a compounding factor that intersects with other sources of disadvantage and vulnerability. First Nations women need financial autonomy to manage social impacts in their communities.

UK use of a similar system for asylum seekers

Restricted debit cards are used in other countries for vulnerable groups. For example, refused asylum seekers in the UK receive temporary support through restricted debit cards ^[14] that can be used to buy food and toiletries at specified stores ^[15].

Asylum seekers living on this support reported ^[16] that the system curtailed their freedoms, privacy and ability to make financial decisions. The UK scheme, like those used in Australia, reinforced the exclusion of people living in poverty.

Financial decision making is critical to an individual’s ability to make informed choices. Cashless debit card systems undermine the fundamental principle of informed choice ^[17], and would clearly be unacceptable to demographic groups with greater social and political capital than those subject to them.

Abolish the system mindfully

We welcome the government’s decision to abolish the cashless debit card. However, careful consultation is called for in the process.

Typically, debit cards are only issued with the prior consent of the consumer. The cashless debit card is an exception to this requirement ^[19], with cards issued to people without their consent ^[20].

It is incumbent on governments to ensure the free, prior and informed consent ^[21] of First Nations people in welfare and financial services initiatives. Programs initiated without the informed consent of participants have seldom been looked on well throughout history.

It is known that financial institutions can collect huge volumes of data, and the cashless debit card system has not been subject to disclosure requirements. There is a risk that data collected from the cards could be shared without the card holders’ knowledge or permission. We would like the government to carefully consider what will be done with this data; where it will be housed, who will have access to it, how long will it be stored and what will happen to it afterwards.

Another consideration for the government should be what support is offered to former card holders when the system is abolished. The cashless debit card has not encouraged saving and instead has debilitated people and entrenched poverty ^[23].

Use of the card was not supported by financial literacy or wellbeing programs. In future, information and financial assistance could be implemented in consultation with First Nations communities and organisations.

The government should be mindful that the financial needs of First Nations people, particularly women, are complex. Restrictions on financial autonomy can have an amplified effect for some communities. This is especially true for communities routinely subject to income controls.