C16/2006 Exemptions from Payment by Direct Credit

Purpose

This Departmental Instruction is to advise service delivery areas of policy changes regarding exemptions from payment by direct credit.

Background

Section 122(4) of the Veterans' Entitlements Act 1986 (VEA) provides that a pension shall be paid in such manner as the Commission determines.

Payment of pensions and benefits by direct bank credit has been the preferred and approved practice since 1986.  Exemptions from direct credit (i.e. payment by cheque) were however allowed in certain circumstances.  These included remoteness or isolation of the pensioner, inadequate local financial services, language or cultural difficulties or legal/administrative barriers to operating an account.

Commission Decision

In 1999 the Commission agreed to abolish the exemption criteria existing at that time, and approved the following two exemption criteria only:

• Grant no new cheque payments unless the payee cannot access funds with direct credit, but can demonstrate that they can access funds with a cheque payment; and
• Exempt those payees who have problems with new banking technologies including Automated Teller Machines (ATMs) where there is no other banking facility available.

By removing all previous exemptions the Commission Decision resulted in a significant tightening of the rules regarding exemption from direct credit, reflecting the security and cost issues associated with cheque payment.  As part of this decision the Commission also requested that a substantial approach be made to existing cheque payees, inviting them to change to direct credit.

Policy changes were not notified

Following a recent enquiry it became evident that the Commission Decision (CM5053 of 21 July 1999) was not properly circulated at the time to service delivery areas, and was also not incorporated within internal policy guidelines.

There is evidence that copies of the Commission Decision may have been made available to State Offices, but a related Departmental Instruction or Stateline was not prepared.  Action was not taken at the time to amend the CLIK Policy Library to reflect the more restrictive rules regarding cheque payment.

Policy changes now in production

The CLIK Policy Library, at P11/C5/S3 Exemptions from Payment by Direct Credit has now been amended to include the changes arising out of the Commission Decision.

Contact

The contact person is Brian Butler, Income Support and Aged Care Policy, on ext. 16110.