Indigenous welfare: Don't punish loan shark's victims

Issue 

The actions of loan shark Sam Tomarchio, revealed on January 15 by the Australian, do not justify the expansion of "welfare quarantining" to the Aboriginal people affected.

Tomarchio was a gold prospector who became an unregistered money lender based in the remote Western Australian mining town of Laverton. He charged around 30% interest and, to secure repayments, took the bank cards and PIN numbers from his hundreds of Aboriginal clients.

Tomarchio lent people up to $5000 a day. His dodgy "business" came to the attention of the media when he contacted the police fraud squad asking them to pursue his "clients" who had unpaid debts. The police declined to help him, as he is unregistered — although not technically breaking any laws. They had already received complaints about his activities from the affected communities.
"There is a continual flow of money available within the community at all times, and this just encourages non-stop drinking", senior sergeant Dave Hornsby to the January 15 Australian.
Hornsby said he was deeply concerned about the effects on families. "They are unable to access their own accounts to withdraw funds, resulting in them having no money to purchase food or items for children."
Police and government agencies have known about Tomarchio's actions for some time, taking action only when his behaviour was exposed in the media. The local Aboriginal council, meanwhile, had been working against Tomarchio's exploitation for some time.
According to the January 22 Australian, Ngaanyatjarraku shire president Damien McLean had complained to the federal Department of Families, Housing, Community Services and Indigenous Affairs in January 2009.
"The taking of these payments is particularly distressing where children are concerned, as the money is being spent 600km from where the children are living and . . . (not) on family support as intended", he wrote.
"The loss of income has compounded disadvantage and poverty for children and families in the community."
Other Aboriginal people had filed complaints about Tomarchio's dealings with the WA Department of Commerce as early as April 2008.

According to Bitethedust.com.au, a blog written by an outback nurse in remote WA, McLean has so far persuaded about 100 people to cancel their bank cards, after Tomarchio took them. Because he is unregistered, there is no legal obligation for clients to pay back the money they owe him, and police are advising people to default.

Since Tomarchio's "one-man bank" came to public light and people have stopped paying his exorbitant interest rates, violence has declined by about two-thirds, according to the January 25 Australian.

According to the article: "The West Australian Department of Commerce says Mr Tomarchio does not have a credit provider's licence and it has begun an investigation."

Centrelink is offering to alter payments and provide phones for people who wish to cancel cards held by Tomarchio.

One of the reasons people became so dependent on Tomarchio was because there was no automatic teller machine in town: Laverton shire couldn't afford the $30,000 necessary to set one up.

So, Tomarchio was able to act as a bank, filling the void left by a lack of basic services — at 30% interest of course. The January 21 Australian said that a business had now offered to donate an ATM. The shire council is in negotiations with Bendigo Bank to become its Laverton agent.

These measures will undermine the ability for operators like Tomarchio to exploit impoverished Aboriginal communities, but other proposed "solutions" could do more damage than good.

Centrelink was preparing to recommend to Aboriginal affairs minister Jenny Macklin that the policy of "welfare quarantining" be extended to communities like Laverton, "as a means of reducing Mr Tomarchio's access to Aborigines' welfare payments", the January 19 Australian said.

Welfare quarantining, introduced in 2007 to Northern Territory Aboriginal communities as part of the intervention, converts 50% of welfare payments into a "Basics" card that can only be spent on food, clothing and medical supplies, and only at certain stores.

Widely condemned as a racist, controlling measure, Centrelink was proposing that the policy be used to protect people from moneylenders like Tomarchio.

But this would only limit the amount that Tomarchio could take from people — to 50% of their income. What's more, NT Aboriginal people living under welfare quarantining have reported ways around the restrictive Basics card system — using the card to buy goods then returning them for cash refunds. There is now guarantee that Tomarchio couldn't take people's Basics cards as payment, using them to buy his own food or clothing.

Welfare quarantining is unlikely to hurt the Tomarchios of the world.

But it would certainly hurt Tomarchio's victims.

Since it was introduced, there have been three government-commissioned reports into welfare quarantining. All have noted a marked decline in health and wellbeing

The government's own statistics show that reports of domestic violence are up 61% since it was introduced. Substance abuse is up 77% and 13% more infants have been hospitalised for malnutrition.

In short, all the policy does is decrease the power that impoverished people have over their own income. As a result, poverty and the related violence and abuse, increases.

The police statistics showed the marked decline in violence after people stopped paying the exorbitant fees to Tomarchio and had more control over their own money. In fact, it's likely that demand for loans from people like Tomarchio would increase under programs that reduced people's discretionary income.

Real protection from operators like Tomarchio requires massive, long-term public investment in ending poverty in remote Aboriginal communities. Laverton has been a dying town for a long time, despite being located in the heart of the WA mining boom.

Unless real efforts are made to direct the wealth of the boom to those who most need it, vultures like Tomachio will find ways to make money out of those with the least.

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