The Australian Competition and Consumer Commission - which has now instituted Federal Court proceedings against Australia’s largest telco - said in a statement on Thursday that Telstra has admitted it breached Australian Consumer Law and acted unconscionably when sales staff at five licensed Telstra-branded stores signed up 108 Indigenous consumers to multiple post-paid mobile contracts which they did not understand and could not afford between January 2016 to August 2018.
In each case, these contracts were entered into with individual consumers on a single day when they visited a store, the ACCC notes.
The ACCC said Telstra has admitted that staff at five stores in the Northern Territory, South Australia and Western Australia used unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra.
“Many of the consumers spoke English as a second or third language, had difficulties understanding Telstra’s written contracts, and many were unemployed and relied on government benefits or pensions as the primary source of their limited income. Some lived in remote areas where Telstra provided the only mobile network,” the ACCC said in its statement.
“In some cases, sales staff at the Telstra licensed stores did not provide a full and proper explanation of consumer’s financial exposure under the contracts and, in some cases, falsely represented that consumers were receiving products for 'free'.
“In many instances, sales staff also manipulated credit assessments, so consumers who otherwise may have failed its credit assessment could enter into post-paid mobile contracts. This included falsely indicating that a consumer was employed.”
The ACCC says Telstra’s board and senior executives were unaware of the improper sales practices when they occurred, and Telstra has acknowledged that it had no effective systems in place to detect or prevent this type of conduct.
“Telstra has agreed to the filing of consent orders and joint submissions in Court in support of penalties totalling $50 million being imposed by the Court. It is a matter for the Court to decide whether these penalties are appropriate.”
“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” ACCC Chair Rod Sims said.
“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.”
The ACCC says that the average debt per consumer was more than $7400. and the improper sales practices caused many of the affected consumers severe personal financial hardship and great distress - and Telstra referred some unpaid debts to debt collectors, which had the potential to cause those consumers to feel further personal and cultural shame and embarrassment.
“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,” Sims said.
The ACCC says the Federal Court will decide at a later date whether the orders sought are appropriate and, if imposed by the Court, the penalties would be the second highest total penalties ever imposed under Australian Consumer Law.
Sims says Telstra has since taken steps to waive the debts, refund money paid and put in place steps to reduce the risk of similar conduct in the future.
In addition to the remedies to be determined by the Court, the ACCC has accepted a court-enforceable undertaking from Telstra in which Telstra undertakes to provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline and enhance its digital literacy program for consumers in certain remote areas.
“Telstra is Australia’s largest telecommunications provider. It has clearly failed to meet community expectations for appropriate business behaviour,” Sims said.
“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.”