Australia’s largest telecommunications company faces A$50m (£27.5m; $37m) fine for selling mobile contracts to vulnerable indigenous customers and exploiting cultural differences The telco will shell out the second-highest penalty ever imposed under Australian Consumer Law.
The fines apply to 108 indigenous customers who paid for the contracts they could neither understand nor afford.
In an e-mailed statement, Telstra admitted to”unconscionable conduct” in signing up 108 indigenous customers at five licensed stores between January 2016 and August 2018 at licensed Telstra stores in Alice Springs, Darwin, Adelaide, and Broome, in Australia’s far northwest. Mr Andrew Penn, the Chief Executive Officer apologised on Thursday for the behaviour of his staff
“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,” Mr Penn said.
He said Telstra has taken immediate standard action for affected customers, including a full refund in addition to the proposed penalty. Mr Penn said he took full responsibility, further adding that they will reduce the risk of similar conduct in the future.
Australia’s consumer watchdog brought this exploitation into the light.
“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” the chairman of the Australian Competition and Consumer Commission (ACCC) Rod Sims said in a statement.
The ACCC said Telstra admitted that staff at five stores used “unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra”.
The ACCC said sales staff did not adequately explain the financial risks of customers under the contracts. In many cases, the customers only spoke English as a second or third language.
The ACCC added that staff had also manipulated credit ratings, and in some cases falsely indicated that a customer was employed so that consumers who otherwise may have failed its credit assessment could enter into post-paid mobile contracts, the ACCC added. The average debt per consumer affected was $7400 and the average bill they were charged was about $320 per month.
The court hearing and potential penalty follows a year-long investigation by the ACCC into potential breaches of consumer law by the telco giant.
ACCC said the Telstra’s board and senior executives were unaware of the improper sales practices when they occurred, but managers who learned of the practices failed to do anything about them.
“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 acknowledged to the ACCC that it had no effective systems in place to detect or prevent this type of conduct. It has agreed to the filing of consent orders to the court in support of penalties totalling $50 million, the ACCC said. It will be up to the court to decide whether the penalties are appropriate.
Two weeks ago the industry regulator, the ACMA, ordered Telstra to repay A$2.5 million to customers who had been overcharged for landline repairs. The error, which was self-reported by Telstra, was a result of a faulty implementation of the CRM system.