Telstra to pay $50m penalty for ‘unconscionable conduct’

The telco has been ordered to pay the second highest penalty ever imposed for ‘unconscionable conduct’.

Telstra will pay the second highest penalty ever imposed under Australian Consumer Law with the Federal Court ordering the telco to pay $50m, plus costs, after it admitted to selling mobile devices and plans to Indigenous customers who could not afford them.

The decision follows a lengthy ACCC investigation. 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.

Telstra chief executive Andy Penn said he accepted the court’s decision and vowed to rebuild trust.

“Today the Federal Court has formally approved the settlement. This brings an end to what has been a deeply challenging and disappointing chapter in our history and one in which we are already taking steps to fix,” he said.

“Again, I want to apologise to all of the Indigenous customers affected by this. 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.

“It is clear we need to better understand and support our Indigenous customers. That means spending time on Country, as I have done, on several occasions since this issue came to light and will continue to do as well as listening to and learning from Indigenous customers and communities, meeting with community leaders, Elders, and Indigenous organisations.”

He said Telstra had taken steps to provide full refunds with interest, waived debts and allowed most customers to keep their devices to help make things right.

“A First Nations Connect hotline set up now in Darwin is providing some in language support to these customers. Our cultural awareness training has been improved and is now mandatory for anyone at Telstra who engages with Indigenous consumers. A new Indigenous Cultural Compliance Officer has been appointed and is now charged with reviewing and continuously improving the way we engage with Indigenous customers and live up to our commitments to them,” he said.

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

Chair of the Australian Competition and Consumer Commission Rod Sims.

ACCC Chair Rod Sims said that in some cases, Telstra sales staff at the licensed stores failed to properly explain the potential costs of the contract to the consumers and falsely represented that consumers were receiving products for ‘free’.

“We expect much better behaviour from large businesses like Telstra, but all businesses in Australia have a responsibility to ensure sales staff are not breaching consumer law by manipulating or tricking consumers into buying products or services they do not need or cannot afford,” he said.

“This conduct included manipulating credit assessments and misrepresenting products as free, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.

“Telstra’s board and senior executives failed to act quickly enough to stop these illegal practices when they were later alerted to them.”