Telstra has conceded that it practiced ‘unconscionable conduct’ to the ACCC who is now targeting Telstra for exploiting Indigenous customers, with the telco now facing a potential $50 million fine.
Telstra told the Australian Competition and Consumer Commission that the company unethically targeted Indigenous Australians with mobile phone plans, and is now facing a potential fine for exploiting those Indigenous customers.
The ACCC has confirmed its intention to take the proceedings to the Federal Court at the conclusion of an 18-month investigation into Telstra’s sales practices. The investigation was put in place after a number of financial counsellors in rural Australia raised concerns with the ACCC.
Investigators found that the average debt per customer was $7,400, with one customer owing Telstra more than $19,000.
The ACCC has said in a statement that “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 and August 2018.”
In each case, according to the release, these contracts were entered into with individual consumers on a single day when they visited a store. The ACCC says that Telstra exploited Indigenous customers that either couldn’t understand the contract they were signing, or did not have the financial means to meet the contracts agreements.
“Tesltra has admitted that staff in 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.”
“In some cases, sales staff at the Telstra licensed stores did not provide a full and proper explanation of the consumer’s financial exposure under the contracts and, in some cases, falsely represented that consumers were receiving products for ‘free’.”
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In addition, the ACCC says that “sales staff also manipulated credit assessments, so consumers who otherwise may have failed its credit assessment could enter into postpaid mobile contracts.”
The ACCC says that “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.”
To make things worse for those Indigenous consumers that the ACCC says Telstra exploited, the company was the only mobile provider, with investigators saying that the company took advantage of this position.
“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,” says the ACCC.
The ACCC’s Chair, Rod Sims has issued a statement saying that the investigation uncovered a number of unethical sales practices that were exploiting Indigenous customers with phone plans that they were not in a reasonable position to sign.
“This is huge. This is right off the scale in terms of behaviour we have taken to court in relation to telecommunications,” Sims said. “This is exploiting vulnerabilities in the most extreme sense, it is extremely concerning behaviour,” he added.
“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers.”
Sims continued to explain that “even though Telstra became increasingly aware of the 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.”
“These debts significantly impacted the affected Individuals,” Sims said. “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.”
The ACCC will take its findings to the Federal Court, who will decide whether or not to impose the orders recommended by the ACCC. If imposed, the $50 million penalty would represent the second-largest in Australian Consumer Law history.
Telstra has said that it has made efforts to refund any money paid, and waive existing debts for those implicated. The company has said it will introduce new systems to ensure the risk of similar conduct in the future is mitigated.
The ACCC has asked that Telstra overhaul its existing compliance program, invest in an expanded hotline for Indigenous Australians and enhance its digital literacy programs for rural Australians.
“Telstra is Australia’s largest telecommunications provider. It has clearly failed to meet community expectations for appropriate business standards… 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.”
Telstra’s Chief Executive, Andrew Penn has issued a statement apologising for Tesltra’s “failings,” stating that “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,” Penn said. “This included appointing a customer advocate to help us better identify and respond to such issues, working more closely with community representatives and financial counsellors, and shortly introducing a specific call centre in the Northern Territory which will also assist our Indigenous customers.”