Telstra fined $50 million over unconscionable treatment of Indigenous phone plan customers

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Telstra fined $50 million over unconscionable treatment of Indigenous phone plan customers



The Federal Court has ordered Telstra to pay a penalty of $50 million plus costs for its treatment of Indigenous customers in rural and remote parts of Australia.

The decision comes after the telco admitted it had acted unconscionably towards 108 customers at five Telstra-branded stores, by selling phone plans people could not afford and did not understand.

Telstra admitted to unconscionable conduct during an investigation by the Australian Competition and Consumer Commission (ACCC).

The ABC exposed the issue in 2019.

The $50 million fine is the second-largest penalty ever imposed on a company for breaking Australian consumer law, after the $125 million Volkswagen "dieselgate" fine in 2019.

Peter Gartlan from Financial Counselling Australia (FCA), which submitted nearly 100 cases from remote parts of Australia to the ACCC, said the decision was welcomed.

"It sends a clear message to the telco industry that mis-selling practices will not be tolerated," he said.

"This conduct should have never happened in the first place."

Vulnerable customers 'saddled with obligations' and debt

Sales staff at the five stores — in Arndale in South Australia, Broome in Western Australia, and Casuarina, Palmerston and Alice Springs in the Northern Territory — engaged in "exploitative" practices between January 2016 and August 2018, the court found.

Many of the 108 customers had difficulties with reading and writing, and had "limited or no" ability to understand the contracts they entered into with Telstra.

Many were also unemployed or spoke English as their second, third or fourth language.

The sales conduct, the court found, included:

  • Manipulating credit assessments to sign up customers who would have otherwise failed Telstra's credit checks
  • Signing up single customers to multiple plans in one day
  • Exploiting customers' lack of understanding of the terms and conditions
  • Creating a false impression that customers would get devices for "free"
  • Selling some customers extras they did not want, or that sales staff misrepresented would be "free"
  • Taking advantage of a "cultural propensity for Indigenous Australian people to express agreement as a means of avoiding conflict"
The customers then racked up huge debts, ranging from $1,600 to $19,524, and many were pursued by debt collectors.

Do you know more about this story? Email Specialist.Team@abc.net.au
The federal court finding noted that while the 108 customers were "saddled with obligations" that would lead them to incur huge debts, the five Telstra stores received an average financial bonus of $24,492.

"Individual sales staff at the five Telstra stores were also likely to have been paid incentive payments by the relevant licensee for their work in encouraging the affected consumers to enter into these contracts," the court finding said.

Remediation efforts welcome after 'outrageous' conduct
Telstra chief executive Andy Penn said the Federal Court's fine "brings to an end to what has been a deeply challenging and disappointing chapter in our history".

"I want to apologise to all of the Indigenous customers affected by this," he said.

"I am deeply and personally disappointed that we have let you down. We should have listened more carefully. We should have been more attuned to what was happening. We should have picked this up earlier."


Last November, Telstra told the court it had made "full remediation" and had also implemented measures like staff training and a call centre for Indigenous customers in remote communities.

The telco said other measures it had taken included appointing an Indigenous Cultural Compliance Officer and launching an Indigenous policy statement that outlined how it engaged with communities.

Mr Penn also said Telstra was offering remediation to any affected customers between 2016 and 2018 who may not have come forward yet.

Mr Gartlan said getting the cases to court involved a "monumental effort" by financial counsellors who worked with Aboriginal people in remote parts of Australia.

He said while FCA often heard reports of telcos mis-selling, Telstra's case was particularly "outrageous".

"To the extent this conduct was systemic and so broad … this is the first time we've seen such conduct on such a huge scale," he said.

"And that is why this fine is so important."


https://mobile.abc.net.au/news/2021...-of-indigenous-phone-plan-customers/100132000
 
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