Telstra has agreed to pay $50m in compensation after the telco admitted to using “unfair selling tactics” and exploiting language and cultural barriers to sign up more than 100 Indigenous people to mobile phone contracts that in one case led to a debt of $19,000.
On Thursday, the Australian Competition and Consumer Commission announced it had initiated federal court proceedings against Telstra, alleging that the company breached consumer law and acted “unconscionably” by signing up 108 Indigenous people to post-paid mobile contracts “which they did not understand and could not afford”.
According to the ACCC, between January 2016 and August 2018 staff at five locations in the Northern Territory, South Australia and Western Australia used “unfair selling tactics” to sign people up to contracts which led to them having an average debt of more than $7,400.
In some cases, the people signed up to the contracts lived in remote areas where Telstra provided the only available network and the ACCC alleged the sales staff took advantage of a “substantially stronger bargaining position”.
Many of the customers spoke English as a second or third language, had difficulties understanding Telstra’s written contracts, or were “unemployed and relied on government benefits or pensions as the primary source of their limited income”.
The ACCC also alleges that in some cases, Telstra sales staff 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”.
In one case, a Telstra client compiled a debt of $19,000, while another reported experiencing “extreme anxiety worrying they would go to jail if they didn’t pay”.
A third customer used money withdrawn from their superannuation towards paying the Telstra debt.
“In many instances, sales staff also manipulated credit assessments, so consumers who otherwise may have failed its credit assessment could enter into post-paid mobile contracts. This included falsely indicating that a consumer was employed,” the ACCC said.
While the case is still before the court, Telstra has admitted to breaching consumer law and “unconscionable conduct”. In joint submissions to the federal court with the ACCC, the company said it supported penalties “totalling $50m”.
If agreed to by the court, the penalties would be the second-highest total penalties ever imposed under Australian consumer law.
“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” the ACCC chair, Rod Sims, said.
“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 ACCC said Telstra had since taken steps to waive the debts, refund money paid and put in place steps to reduce the risk of similar conduct in the future.