Telstra faces $50m fine for ‘unfair selling tactics’ aimed at Indigenous people

By Cameron Micallef and Naomi Neilson|26 November 2020
Telstra faces $50m fine for ‘unfair selling tactics’ aimed at Indigenous people

Australia’s largest telecommunications provider will face Federal Court after admitting it breached consumer law and acted unconscionably by using “unfair selling tactics” in its approach to 108 Indigenous customers.

Telstra has admitted staff at five stores in Western Australia, South Australia and Northern Territory took advantage of the strong bargaining position it was in when selling post-paid mobile products to 108 Indigenous customers who did not know they couldn’t afford it. Telstra has agreed to submissions in support of penalties totalling $50 million but it is now for the court to decide.

ACCC chair Rod Sims said the case exposes “extremely serious conduct” that exploits “social, language and cultural vulnerabilities” of Indigenous consumers.

“Even though Telstra became increasingly aware of elements of the improper practice by staff at Telstra licensed stores, it failed to act quickly enough to stop it. The practice continued and caused further, avoidable hardships to Indigenous consumers.”

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Many of the consumers spoke English as a second or third language and had difficulty understanding Telstra’s written contracts. Many were unemployed and relied on either government benefits or pensions as their primary source of incomes and some resided in remote areas where Telstra was the only network. In each case, the contracts were entered into with individual consumers on a single day when they visited the stores.

ACCC said that in some cases, sales staff did not provide a full and proper explanation of consumer’s financial exposure under the contracts and falsely represented that the consumers were receiving products for free. In some instances, staff manipulated the credit assessments so consumers who would have failed could enter into a contract.

The average debt per consumer was more than $7,400. Telstra referred some unpaid debts to debt collectors, which had the potential to cause those consumers to then feel further personal and cultural shame and embarrassment.

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

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. It will also provide remediation to affected consumers, improve existing compliance programs, review and expand its Indigenous telephone hotline and enhance digital literacy programs for consumers.

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Telstra chief apologises

Telstra chief executive Andrew Penn apologised for the staff tactics, saying it was “failing” by the company.

“I have spoken often about doing business responsibly, including about these failings, since earlier this year. I am determined we have a leadership position and hold ourselves accountable in this regard,” he told media.

“While it was a small number of licensee stores that did not do the right thing, the impact on these vulnerable customers has been significant and this is not OK.

“We have taken steps to provide full refunds with interest, waived debts and allowed most customers to keep their devices to help make things right.”

Telstra faces $50m fine for ‘unfair selling tactics’ aimed at Indigenous people
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