Telstra faces $50 million fine for tricking Indigenous customers into contracts, sending debt collectors

Telstra is facing a $50m penalty for using “unfair sales tactics,” manipulating credit reports, and exploiting cultural differences of more than 100 Indigenous consumers.

Telstra is facing a $50 million penalty for using “unfair sales tactics,” manipulating credit reports, and exploiting language and cultural differences to take advantage of more than 100 Indigenous consumers, who were signed up to multiple contracts they did not understand and could not afford to pay.

The Australian Competition and Consumer Commission launched legal action against the country’s biggest telecommunications provider on Thursday after representatives admitted it had acted “unconscionably” and broken Australian Consumer Law to trick the customers into signing contracts.

The average debt for those affected was more than $7400.

Telstra chief executive Andy Penn said he had met with some customers to apologise for the unfair practices used in five Telstra stores. Picture: AAP Image/James Ross

ACCC chairman Rod Sims said while Telstra’s senior executives were not aware of the conduct that occurred in five Telstra stores, the company acknowledged it did not have systems in place to detect the problems and did not take action to stop them.

The unfair sales conduct continued between January 2016 and August 2018.

“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 debts caused significant distress to many of those affected, Mr Sims said, with one customer “worrying they would go to jail if they didn’t pay,” another left owing $19,000, and one person withdrawing money from their superannuation to pay off the debt.

Telstra employed debt collectors to retrieve money from some customers that staff had tricked into signing contracts.

The company has agreed to pay the $50 million penalty, and has waived customers’ debts, refunded money paid under these contracts, and put systems in place to detect similar conduct.

Telstra chief executive Andy Penn said the exploitative practices occurred in Telstra stores in the Northern Territory, South Australia and Western Australia, and the company had initially underestimated the problem.

ACCC chairman Rod Sims is seeking further action from Telstra to stop unfair sales practices used against vulnerable consumers. Picture: Zak Simmonds

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

“When we looked more deeply it was clear there were additional instances where our processes had not been followed and our understanding of customers could have been better.”

Mr Penn said he had visited the states earlier this year to “meet with some of the affected communities and customers to apologise,” and to ensure illegal sales practices were not used.

Australian Communications Action Network chief executive Teresa Corbin called behaviour at the Telstra stores “shocking,” and hoped a $50 million penalty would provide a “strong disincentive” to other carriers.

“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,” Ms Corbin 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 ACCC is seeking further remedies from Telstra, including an expansion of its Indigenous telephone hotline and digital literacy services for customers in some remote communities.

The Federal Court will determine if the $50 million penalty is appropriate.

Originally published as Telstra faces $50 million fine for tricking Indigenous customers into contracts, sending debt collectors