The Australian Competition and Consumer Commission (ACCC) is taking Telstra to court for ‘unconscionable’ conduct while selling mobile plans to Indigenous customers.
What happened to Indigenous customers in Telstra stores
Between January 2016 and August 2018 five Telstra-branded stores signed up 108 Indigenous customers to multiple post-paid mobile contracts. This occurred across five stores across the Northern Territory and South Australia and Western Australia — in Alice Springs, Casuarina, Palmerston, Arndale and Broome.
According to the ACCC, these were plans that the customers did not understand and could not afford.
“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,” the ACCC said in a statement.
“Some lived in remote areas where Telstra provided the only mobile network.”
It has also been revealed that in some cases the sales staff did not properly explain the contracts and told the customers they were getting products for ‘free’.
According to the ACCC in ‘many’ instances credit assessments were manipulated so the customers could enter into the contracts. In some cases staff falsely indicated the customers was employed.
Customers left in serious debt
One customer ended up $19,000 in debt and another withdrew from their superannuation to pay part of the debt. The average debt between the total number of customers was more than $7,400.
Some of the debts were referred to debt collectors by Telstra.
The ACCC is taking Telstra to court to the tune of $50 million in penalties. Telstra has agreed to the filing of consent orders and joint submissions.
Telstra’s board and executives were apparently unaware of the sales practices at the time. However, the telco has admitted it did not have an effective system to prevent these sales practices.
“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” ACCC Chair Rod Sims said in a press release.
“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.”
Telstra admits to wrongdoing, CEO gets involved
Telstra has admitted to the unconscionable conduct and has entered a court enforceable undertaking with the ACCC to rectify the situation for impacted customers.
This is in addition to the proposed $50 million penalty by the ACCC.
“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,” Telstra CEO, Andrew Penn, said in a statement.
“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.”
According to Penn, Telstra has appointed a customer advocate to “help us better identify and respond to such issues” and has opened a call centre in the Northern Territory to assist Indigenous customers.
“Our team in the Northern Territory is also spending more time in these local communities directly helping customers understand their plans as well manage billing and service issues,” Penn said.
Penn also visited impacted communities sometime in 2020 to apologise.
“We have always taken this matter seriously, however initially we thought these were isolated issues. When we looked more deeply it was clear there were additional instances where our processes had not been followed and our understanding of customers could have been better,” Penn said.
“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.”
A court date is yet to be set, but if the Federal Court decides the orders set by the ACCC are appropriate it will be the second-highest penalty ever handed down under Australian Consumer Law.