Telstra fined $10 million, forced to refund thousands of customers for third-party subscriptions

AUSTRALIA’S largest telco has apologised for charging its customers for premium phone services they did not knowingly subscribe to, as it was hit with a $10 million fine.

AUSTRALIA’S largest phone provider will be forced to pay $10 million in court-ordered fines and millions of dollars more in refunds after billing customers for premium phone services they did not knowingly subscribe to and could not easily stop.

Federal Court Justice Mark Moshinsky handed down the penalties against Telstra in Melbourne on Thursday after the company admitted unfairly collecting fees from more than 100,000 customers and failing to adequately warn them about their premium billing practices, in breach of the Australian Securities and Investments Commission Act.

Thousands of Telstra customers were slugged for ringtones, games, videos, and other digital content as part of the company’s Premium Direct Billing Service between 2015 and 2016, even though they hadn’t agreed to pay for them.

Australian Competition and Consumer Commission chairman Rod Sims, who launched proceedings against the company, said Telstra refused to stop the charges even though it was aware children “were at risk of inadvertently subscribing on a family member’s phone,” and despite an overwhelming number of customer complaints.

“This is the equal highest penalty under Australian Consumer Law,” Mr Sims told News Corp.

“What influenced this was they had a lot of complaints about this — they topped about 10,000 complaints in a month from people ringing up and saying they were paying for something they hadn’t ordered — and they didn’t do anything about it.

“They also often referred complaints to the third-party app providers. This behaviour was extremely poor.”

Telstra collected $61.7 million in commissions from premium billing services between 2013 and October 2017, with charges billed to more than 2.7 million customers.

The company enabled Premium Direct Billing on accounts by default, and did not warn customers that services would be charged through their mobile phone accounts.

Telstra only stopped third-party billing services on March 3 this year, and has issued more than $5 million in refunds to customers so far, but Mr Sims said further refunds “in the order of several millions of dollars” were likely to follow the Federal Court finding.

Telstra consumer and small business group executive Vicki Brady said in a statement that Telstra did not improve its processes fast enough to avoid frustrating customers.

“A large proportion of customers who decided to subscribe to a service were happy with it, however, the number of complaints received over time shows there were issues with the (premium direct billing) service that needed to be addressed,” she said.

“We apologise to our customers who have been charged for (premium) subscription services they did not knowingly request or could not opt out of.”

Mr Sims said the ACCC was investigating whether other Australian phone carriers were unfairly billing customers for premium content, and anyone who believed they had been charged incorrectly should lodge a complaint with their provider and, if the matter was not resolved, the Telecommunications Industry Ombudsman.

Originally published as Telstra fined $10 million, forced to refund thousands of customers for third-party subscriptions