“Unconscionable” Sales To Indigenous Customers Could Cost Telstra $50M
Telstra could pay out a $50 million settlement over admitted breaches of Australian consumer law and “unconscionable” sales of post-paid mobile products to Indigenous customers.
Between 2016 and 2018, sales staff at five licenced Telstra-branded stores in the Northern Territory, South Australia, and Western Australia signed up 108 Indigenous customers to post-paid mobile contracts which they could neither understand nor afford. The telco has admitted that these employees used unfair sales tactics and exploited their stronger bargaining positions in these sales.
According to Rod Sims, chair of the ACCC, the case exposes “extremely serious conduct” which took advantage of these customers’ vulnerabilities, including social, language, cultural, and literacy issues.
“Even though Telstra became increasingly aware of elements of the improper practices by sales staff at Telstra licensed stores over time, it failed to act quickly enough to stop it, and these practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers,” he said.
The consumers targeted often spoke English as a second or third language and had trouble understanding the written contracts. Many relied on government benefits or pensions, and some lived in remote communities where Telstra was the only mobile option.
Sales staff at the licensed stores sometimes failed to provide full and proper details of the customers’ financial exposure, including lying to customers and saying they were receiving products for “free”. There were also instances of manipulating credit assessments to sell contracts to customers who would otherwise have been ineligible, including at least one unemployed consumer who was marked as employed.
These practices resulted in the customers racking up an average debt of $7400, causing financial hardship and distress, with some hounded by debt collectors.
“These debts significantly impacted the affected individuals. For example, one consumer had a debt of over $19,000; another experienced extreme anxiety worrying they would go to jail if they didn’t pay; and yet another used money withdrawn from their superannuation towards paying their Telstra debt,” said Sims.
Telstra CEO Andrew Penn has apologised for the conduct, which Telstra did not have adequate systems in place to detect or prevent.
“While it was a small number of licensee stores that did not do the right thing, the impact on these vulnerable customers has been significant and this is not OK.
“We have taken steps to provide full refunds with interest, waived debts and allowed most customers to keep their devices to help make things right,” he said.
Penn insisted that Telstra had always taken the matter seriously, but believed initially that the issues were isolated.
“Being a responsible business and doing what is right for customers and the community is a non-negotiable for Telstra, but we do not always get it right.
“We need to acknowledge when that happens, and today is unfortunately one of those times. Disappointingly these customers did not receive the standard of care or service they should expect from us, and we did not then act quickly enough to fix the issues once they became known,” he said.
A $50 million settlement, agreed upon by Telstra and the ACCC, will now go to the Federal Court for approval. If found appropriate, they would be the second highest penalties ever seen under Australian consumer law.
According to Sims, Telstra has also entered into a court-enforceable undertaking to remedy the situation for affected customers, improve compliance programs, expand its Indigenous phone hotline, and enhance digital literacy programs for consumers in remote areas.
“This case is a reminder to all businesses to ensure that they comply with Australian Consumer Law in their dealings with all consumers, especially vulnerable consumers in regional or remote communities,” the ACCC chair said.
This is not the first time in recent years Telstra has run afoul of the consumer watchdog: the Federal Court in 2018 slugged Telstra with $10 million in penalties for making false or misleading representations to customers in relation to its third-party “Premium Direct Billing” service, which charged customers for unknowingly-purchased digital content such as games and ringtones.