Telstra cops $50m ACCC penalty fine over ‘unconscionable’ Indigenous sales

Telstra has been hit second highest penalty ever imposed under Australian Consumer Law for leaving vulnerable Indigenous customers deep in debt.

Telstra CEO Andrew Penn says the company has taken steps to ensure similar unconscionable sales do not occur again. Picture: AAP

Telstra has apologised and will pay a $50m penalty as part of a settlement with the consumer watchdog, after it admitted to selling mobile devices and plans to Indigenous customers who could not afford them.

The sales, between January 1, 2016 and August 27, 2018, involved 108 customers in NT, SA and WA. Some of their debts were then sold to third-party collection agencies.

The average debt per consumer was more than $7400.

If confirmed by the Federal Court, the $50m total would be the second highest total penalty ever imposed under Australian Consumer Law.

Telstra chief executive Andy Penn said that behaviour was unconscionable, and that his telco had taken steps to provide full refunds with interest, waived debts and allowed most customers to keep their devices to help make things right.

“I have spoken often about doing business responsibly including about these failings since earlier this year. I am determined we have a leadership position and hold ourselves accountable in this regard,” Mr Penn said.

“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.”

Telstra had appointed a customer advocate to help the company better identify and respond to such issues. It will work more closely with community representatives and a financial counsellor, and introduce a specific call centre in the Northern Territory to assist indigenous customers. The $50m penalty had already been provisioned for in the company’s most recent full-year results in August.

“Our team in the Northern Territory is also spending more time in these local communities directly helping customers understand their plans as well manage billing and service issues,“ he said.

“Early this year I visited the NT, SA and WA to meet with some of the affected communities and customers to apologise and hear first-hand of the impact of these sales practices on them. I also wanted to understand how our program to address the problems was progressing and being received.

“We have always taken this matter seriously, however initially we thought these were isolated issues.

ACCC chair Rod Sims said many of the consumers spoke English as a second or third language, and had difficulties understanding Telstra’s written contracts. Many were unemployed and relied on government benefits or pensions.

“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” Mr 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 chief executive of the Australian Communications Consumer Action Network (ACCAN), Teresa Corbin, described the actions of sales staff at the licensed Telstra stores as shocking.

“The way in which they seem to have blatantly overlooked obligations under Australian Consumer Law and the impact their actions would have on consumers is extremely disappointing,” she said.

“Most consumers find signing up to a new phone plan to be confusing. In this case, Indigenous consumers were especially vulnerable because they didn’t always speak English as their first language, they didn’t understand the contracts they were being asked to sign, and often relied on the advice of telco staff as to what to sign up for — regardless of the price or suitability of the plan.

“The $50m fine being proposed should be a strong disincentive to other retailers who do not comply with the law in protecting vulnerable customers.

“We recognise that Telstra has taken positive steps to remedy the harm that they have caused the impacted consumers, including waiving debts and refunding money paid. Vitally, they are actively taking steps to reduce the risk of this sort of behaviour from occurring in the future.

“We are working closely with Telstra to ensure that this positive change continues.”