Telstra faces court over unconscionable sales to Indigenous customers

Telstra faces court over unconscionable sales to Indigenous customers

The telco has acknowledged that it had no effective systems in place to detect or prevent the conduct.

Credit: Telstra

The Australian consumer watchdog has kicked off court proceedings against Telstra in a case said to expose “extremely serious conduct” relating to the sale of post-paid mobile products to Indigenous consumers.

The Australian Competition and Consumer Commission (ACCC) instituted Federal Court proceedings on 26 November against Telstra for unconscionable conduct after the country’s largest telco conceded it had breached Australian Consumer Law.

According to the ACCC, Telstra admitted it acted unconscionably when sales staff at five licensed Telstra-branded stores in Alice Springs, Casuarina and Palmerston, Arndale and Broome signed up 108 Indigenous consumers to multiple post-paid mobile contracts, which they did not understand and could not afford, between January 2016 to August 2018.

In each case, the ACCC said, these contracts were entered into with individual consumers on a single day when they visited a store.

Telstra has admitted that staff at five stores in the Northern Territory, South Australia and Western Australia used unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra.  

According to the watchdog, many of the customers in question spoke English as a second or third language, had difficulties understanding Telstra’s written contracts, and many were unemployed and relied on government benefits or pensions as the primary source of their limited income.

In some cases, the ACCC said, sales staff at the Telstra licensed stores did not provide a full and proper explanation of consumer’s financial exposure under the contracts and, in some cases, falsely represented that consumers were receiving products for 'free'.

It is claimed that Telstra’s board and senior executives were unaware of the improper sales practices when they occurred, although the telco has acknowledged that it had no effective systems in place to detect or prevent this type of conduct.

The average debt per consumer was more than $7,400, according to the ACCC. Moreover, the improper sales practices caused many of the affected consumers severe personal financial hardship and great distress. 

Telstra also referred some unpaid debts to debt collectors, which had the potential to cause those consumers to feel further personal and cultural shame and embarrassment, the ACCC said.

“These debts significantly impacted the affected individuals. For example, one consumer had a debt of over $19,000; another experienced extreme anxiety worrying they would go to jail if they didn’t pay; and yet another used money withdrawn from their superannuation towards paying their Telstra debt,” ACCC Chair Rod Sims said.

“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers.

“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,” he added. 

Telstra has since taken steps to waive the debts, refund money paid and put in place steps to reduce the risk of similar conduct in the future.

The telco has also agreed to the filing of consent orders and joint submissions in court in support of penalties totalling $50 million being imposed by the court. However, it is a matter for the court to decide at a later date whether these penalties are appropriate.

If imposed by the court, the penalties would be the second highest total penalties ever imposed under Australian Consumer Law.

In addition to the remedies to be determined by the Court, the ACCC has accepted a court-enforceable undertaking from Telstra in which Telstra has undertaken to provide remediation to affected consumers, improve its existing compliance program, review and expand its Indigenous telephone hotline and enhance its digital literacy program for consumers in certain remote areas.

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