Australia’s largest telecommunications company Telstra faces a $50 million fine after admitting it breached Australian consumer law and that company staff used unfair selling tactics to take advantage of Indigenous customers.
An 18 month investigation by the Australian Competition and Consumer Commission found the company acted ‘unconscionably’ when it signed up over a hundred Indigenous customers to post-paid mobile phone plans between January 2016 to August 2018.
The ACCC’s inquiry found that many consumers didn’t fully understand the contracts and were unable to afford the costs associated with high premium mobile phone plans.
The average debt per consumer was more than $7400, while one consumer had a debt of over $19,000.
Telstra employees signed people up into locked in contracts on the same day they visited the stores.
ACCC’s Chairman, Rod Sims said he was shocked at the scale of the unscrupulous actions of one of the country's largest consumer brands which included faking credit assessments and employment.
“The extent of this behaviour…” Rod Sims said.
“When you manipulate credit assessments, when you sell people things they clearly don't need, multiple products but also premium plans that everyone would understand these people don't need and also just can't afford." Mr Sims said.
Mr Sims said the behaviour was predatory and the company failed to act even when it became aware of concerns.
“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 long-running probe interviewed people affected from communities in Western Australia, Northern Territory and remote South Australia.
The admitted unconscionable conduct occurred at licensed stores in Alice Springs, Casuarina and Palmerston (NT), Arndale (SA), and Broome (WA).
“Essentially it was all across Australia, we went to some of those communities, That takes time. you have to take witness statements from people that often English isn’t their first language and often people are feeling great shame”
The company has agreed to the filing of consent orders and joint federal court submissions in support of penalties totalling $50 million.
The federal court will decide at a later date whether the penalty is appropriate.
Telstra has acknowledged it had no effective systems in place to detect or prevent the conduct but Mr Sims said he was confident that the investigation would result in change.
"We are now satisfied that Telstra will do the right thing, I think the fact that we have got agreement with Telstra to put to the court a penalty of $50 million; now it is completely up to the court... but I think once you are talking penalties of that size... it sends a message that this is very serious behaviour."
"This shouldn't be associated with their company or with any Australian company"
"Australia's largest telecommunications provider ... has clearly failed to meet community expectations for appropriate business behaviour," Mr Sims said.
The company has 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 a statement to NITV News, Telstra CEO Andrew Penn apologised and said it was working with customers to refund their money and waive debts stemming from the illegal contracts.
“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.”
Mr Penn also said he was working with the local communities and was establishing a centre to better engage with Indigenous customers.
"This included appointing a customer advocate to help us better identify and respond to such issues.
“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."
The company said it would also overhaul its practices and ensure customers better understand their bills and contracts.
"We have been working hard to ensure that our actions, processes and practices reflect our purpose and our values, so that we minimise the potential for such sales practices re-occurring and having such a significant impact on a vulnerable part of our community,"
The ACCC acknowledged that Telstra's senior leadership executives and board were not aware of and didn't authorise the unscrupulous sales practices.