Not happy Jan: Telstra facing $50m fines for ‘unconscionable conduct’

Telstra is facing fines of up to $50 million after admitting it took advantage of vulnerable Indigenous customers by signing them up to mobile phone contracts they didn’t understand and couldn’t afford.

Nov 26, 2020, updated Nov 26, 2020
Telstra CEO Andrew Penn says the deal with Microsoft is "of a scale not seen before in Australia".(Photo: AAP Image/David Crosling)

Telstra CEO Andrew Penn says the deal with Microsoft is "of a scale not seen before in Australia".(Photo: AAP Image/David Crosling)

The penalty, agreed to by the telecommunications giant and the competition and consumer watchdog, could be the second-biggest imposed under Australian consumer law.

Sales staff at five stores across the country signed up 108 Indigenous people to post-paid mobile contracts between January 2016 and August 2018.

Many spoke English as a second or third language and had difficulties understanding contracts.

Many of the customers were also unemployed or relied on government benefits or pensions as their primary source of income.

“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” Australian Competition and Consumer Commission Chair Rod Sims said.

Each customer owed, on average, $7400.

One person ended up more than $19,000 in debt, one was concerned about going to jail if they missed payments, and another had to access their superannuation to foot the bill.

“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,” Mr Sims said.

“These practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers.”

Telstra has admitted it breached Australian consumer law and that sales staff at the stores in the Northern Territory, South Australia and Western Australia acted “unconscionably”.

In some cases, sales staff didn’t give a proper explanation of financial risks and lied that some products were free.

Staff also faked credit assessments to ensure customers would be eligible for the contracts, all of which were signed by people on the day they visited stores.

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Telstra has admitted staff used unfair selling tactics and took advantage of a substantially stronger bargaining position.

The company and ACCC have agreed to the $50 million penalty but the final figure must be decided by the federal court.

Telstra has acknowledged it didn’t have effective systems in place to detect or prevent the conduct.

“I firstly apologise to those customers that have been impacted,” CEO Andrew Penn told reporters on Thursday.

“Getting things right 100 per cent of the time is incredibly hard in a large company like Telstra.

“However, when we do not, it is incumbent upon us to be transparent about it, admit our mistakes, apologise and put things right.”

Mr Penn said he visited some of the affected remote communities earlier this year to offer first-hand apologies.

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

“Australia’s largest telecommunications provider … has clearly failed to meet community expectations for appropriate business behaviour,” Mr Sims said.

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