Telcos under the microscope over "financial hardship" handling

Telcos under the microscope over "financial hardship" handling

Some of Australia's largest telcos have received poor scores over how they handle customers in financial hardship

Vodafone has scored poorly in a so-called "financial hardship" performance study conducted by the peak body for financial counsellors in Victoria, the Financial and Consumer Rights Council (FCRC), and the Australian Communications Consumer Action Network (ACCAN).

The Rank the Telco report describes the results of a survey of Victorian financial counsellors about the "hardship practices" of major telecommunications providers, measuring how well telecommunications companies assist customers who are in financial hardship.

This is FCRC’s first report ranking financial hardship practices within the telecommunications sector.

This Rank the Telco survey polled financial counsellors to draw on their first-hand casework experience over the last 12 months and rate the financial hardship performance of the three major telecommunications providers: Optus, Vodafone and Telstra.

In terms of overall performance, across all measures and overall, Vodafone came last, with a score of 3.2 out of 10 (one being very poor and 10 being excellent), with financial counsellors’ comments pointing to an inflexible refusal to negotiate hardship assistance.

Optus received the highest rating across almost all measures, achieving the top overall score of 4.0 out of 10. Telstra rated second, slightly behind Optus.

But closer examination of Telstra’s scores show greater variability in the views of respondents, which suggests inconsistency in Telstra’s hardship practices.

Also, while there are differences, they are slight, according to the report, alluding to the finding that the standard of hardship practice is “strikingly poor” across the telecommunications industry.

In 2016, for example, the lowest-performing tier-one energy retailers received overall performance ratings of 5.8 out of 10, well above the 4.0 achieved by the top-performing telecommunications provider.

The study found that, compared with water, banking, energy and even debt collection, telecommunications providers are falling short in their treatment of customers in financial difficulty.

FCRC executive officer, Peter Gartlan, said within telecommunications, it is clear that there are some big issues to be tackled.

“Industry has work to do changing upselling practices that see many consumers with plans far beyond their needs or payment capacity; simplifying contracts; improving access to and communication with hardship teams; and expanding the hardship assistance offered to customers.

“Regulators and policymakers also have a role to play in shaping a framework that encourages such practices. The results of this report evidence the need for improvement and warrant serious consideration by the telecommunications industry, regulators, government and other stakeholders,” he said.

Findings from the study also highlighted that post-paid 24-month contracts for mobile phone handsets and services were identified as the biggest contributor to clients’ telecommunications debts. Almost all financial counsellors identified post-paid phone contracts as either a ‘major’ (67 per cent) or ‘moderate’ (32 per cent) contributor to debt.

With the Telecommunications Consumer Protections Code (TCP Code) Code requiring providers to explain the financial implications of a post-paid service before providing it to a consumer, the financial counsellors assessed performance as ‘poor’ or ‘very poor’.

Optus and Telstra performed fairly similarly, with 88 per cent and 90 per cent of respondents rating them as ‘poor’ or ‘very poor’ respectively (weighted averages of 1.9 and 1.8). Vodafone was considered worse again, with 98 per cent rating them as ‘poor’ or ‘very poor’ (weighted average of 1.6).

Their understanding of contractual and billing operations also rated poorly, with 81 per cent of respondents marking it poor for Optus, 84 per cent for Telstra, and 88 per cent for Vodafone.

According to Gartlan, the findings enable providers with the opportunity to "take the lead" and work to significantly improve hardship performance, both individually and across the industry.

“Basic phone and internet services are essential for financial inclusion, particularly in times of crisis or hardship. When people in hardship are disconnected from phone services, it becomes virtually impossible to meet their other critical needs.

“The results of this survey are disappointing, showing that overall financial hardship performance in the telecommunications sector is poorer than in banking or energy retail. Our hope is that this report creates an opening for dialogue about where improvements can be made, building on the positive suggestions made by financial counsellors,” he added.

The study supports the findings of the Telecommunications Industry Ombudsman’s (TIO) assessment of complaints per services in operation (SIO) in October last year, which found increasing complaints for Vodafone, amaysim, and Pivotel.

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