Consumer groups have warned that a Federal Court ruling may allow funeral insurance companies to exploit indigenous communities.

The ruling overturns a Federal Government decision to terminate payments to the Aboriginal Community Benefit Fund (ACBF) through the Centrepay service, which allows the deduction of bills and expenses from Centrelink payments.

Former human services minister Marise Payne announced last year that the ACBF would be removed from Centrepay by July 1 this year, over concerns vulnerable members of the community were at risk.

Many people who take out funeral cover pay more in premiums than they receive in benefits, and if payments are missed or cancelled cover may not be provided, and premiums already paid will not be returned.

The ACBF successfully applied to the Federal Court, and its access to Centrepay remains in place.

Consumer groups believe this will allow the continued targeting of low-income indigenous communities.

Consumer Action Law Centre CEO Gerard Brody says many people mistakenly believe funeral insurance products are a savings plan, not realising that if they stop paying they could lose all their contributions.

“Kicking funeral insurance off Centrepay is the right move,” he said.

Indigenous Consumer Assistance Network CEO Aaron Davis says there is “continual failure to adequately protect indigenous Australians” from exploitative financial products.

“Centrepay is meant to help people budget and manage their essentials such as paying for power bills,” he said. “Instead we have these exploitative companies using Centrepay to sell a dud insurance product.”

The Department of Human Services confirms on its website it can no longer cancel Centrepay deductions to the ACBF.

“We are reviewing the reasons for the court’s judgement and considering our position,” it says.

The ACBF has welcomed the ruling. “Centrepay is the preferred method of payment for many thousands of our customers,” it said. “We commenced those legal proceedings because we believe in our customers’ rights.

“We are very happy on behalf of our customers that the Federal Court agreed the department’s decision was wrong.”