Earlier in the week, Prime Minister Anthony Albanese fulfilled an election promise by announcing that there will be a royal commission into the former government's unlawful debt recovery scheme known as "Robodebt". 

Hundreds of thousands of people are hoping that some light will be shed on how the scheme — labelled a "massive failure" by Federal Court Justice Bernard Murphy — came to be.

Here's what you need to know.

What is Robodebt?

It's the informal name given to a debt recovery program starting in 2015 that falsely accused members of the community of owing money to the government.

The Robodebt scheme automatically issued notices to welfare recipients identified as having debts through a process of income averaging.

This compares a person's reported income with their income as measured by the Australian Tax Office.

While similar techniques were used in the past, the scale of Robodebt's debt recovery was unprecedented.

Shortly after the scheme was implemented, people started to complain over being issued bills for debts that simply didn't exist.

In some cases, the debts topped $24,000.

The scheme unlawfully claimed almost $2 billion in payments from 433,000 people.

What happened then?

The scheme went through a report from the Ombudsman as well as two separate Senate inquiries between 2017 and 2020. 

Each time it was found that there was a lack of fairness with the calculations of debt, that it targeted vulnerable people and that the scheme was causing widespread harm.

Following a class action lawsuit, the Coalition government agreed to an out-of-court settlement of $1.2 billion in November 2020.

The then-government also agreed to drop claims for $268 million in invalid debts where no repayments had been made.

In May 2020, then-government services minister Stuart Robert announced that the Robodebt recovery scheme was being scrapped.

In June 2021, a final settlement of $1.8 billion was approved by Justice Brendan Murphy, who described the program as a "shameful chapter" in Australia’s social security scheme.

Has anyone received a Robodebt settlement?

According to the firm that brought the class action suit, Gordan Legal, victims involved in the suit should be paid by September of this year.

Payments include:

• $112 million in compensation to around 400,000 people, including legal costs
• More than $751 million in unlawfully collected debts

Which minister was responsible for Robodebt?

Back in 2015, then-minister for social services Scott Morrison and then-minister for human services Marise Payne flagged a service that would increase budgetary savings by increasing the pursuits of outstanding debts within the Centrelink system

The scheme was formally announced by the Abbott government as a part of the 2015-16 federal budget.

Following the Liberal party leadership spill of 2016, the newly formed Turnbull government overhauled the federal welfare budget in a crackdown on Centrelink over payments issued between 2010 and 2013.

In December 2016, then-minister for social services Christian Porter announced the debt recovery scheme — christened "Robodebt" by the media — was capable of issuing 20,000 debt notices a week.

The scheme was then overseen by then-human services minister Alan Tudge.

What will a Robodebt royal commission cover?

Prime Minister Anthony Albanese has detailed the four aspects that will be focused on during the foyal commission:

• The establishment, design and implementation of the scheme; who was responsible for it; why they considered Robodebt necessary; and, any concerns raised regarding the legality and fairness
• The handling of concerns raised about the scheme
• The outcomes of the scheme, including the harm to vulnerable individuals and the total financial cost to government
• Measures needed to prevent similar failures in public administration.

Royal commissions also have the power to compel witnesses to testify.

Former Liberal ministers Scott Morrison, Marise Payne, Christian Porter, Alan Tudge and Stuart Robert were involved with the scheme and could potentially be called as witnesses.

Senior members of Services Australia could also be called to give testimony.

Former Queensland Supreme Court justice Catherine Holmes will lead the commission, with the final report due by April 18, 2023.