Telstra faces penalties of AUD 50 million for unconscionable sales to Indigenous consumers

The Australian Competition and Consumer Commission (ACCC) has instituted Federal Court proceedings against Telstra for admitted unconscionable conduct in the sale of post-paid mobile products to Indigenous consumers. The ACCC also reports that Telstra admitted it breached Australian Consumer Law and acted unconscionably when sales staff at five licensed Telstra-branded stores 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, these contracts were entered into with individual consumers on a single day when they visited a store, the ACCC also said. 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. 

Many of the consumers 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. Some lived in remote areas where Telstra provided the only mobile network.

The ACCC also found that, in some cases, 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'. In many instances, sales staff also manipulated credit assessments, so consumers who otherwise may have failed its credit assessment could enter into post-paid mobile contracts. This included falsely indicating that a consumer was employed.

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

The average debt per consumer was more than AUD 7,400. Telstra has agreed to the filing of consent orders and joint submissions in Court in support of penalties totaling AUD 50 million being imposed by the Court. It is a matter for the Court to decide whether these penalties are appropriate.

The Federal Court will decide at a later date whether the orders sought are appropriate. If imposed by the Court, the penalties would be the second highest total penalties ever imposed under Australian Consumer Law.

The ACCC also reports that 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. In addition to the remedies to be determined by the Court, the ACCC has accepted a court-enforceable undertaking from Telstra in which Telstra undertakes 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.