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Telstra hit with huge fine over unconscionable mobile deals

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Telstra has been ordered to pay $50 million in penalties for unconscionable conduct over its scheme to sell mobile phone contracts to more than 100 indigenous people who did not understand the contracts and could not afford the deal.

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Telstra admitted that between January 2016 and August 2018, it breached the 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.

Australian Competition and Consumer Commission chair Rod Sims said Telstra’s board and senior executives failed to act quickly enough to stop these illegal practices when they were later alerted to them.

Sims described the practice by Telstra “truly beyond conscience”.

“Sales staff in these Telstra-branded stores used unconscionable practices to sell products to dozens of indigenous customers who, in many cases, spoke English as a second or third language,” Sims said.

“This conduct included manipulating credit assessments and misrepresenting products as free, and exploiting the social, language, literacy and cultural vulnerabilities of these Indigenous customers.”

The $50 million penalty imposed against Telstra was the second-highest penalty ever imposed under the Australian Consumer Law.

The ACCC said in some cases, sales staff at the licensed stores failed to properly explain the potential costs of the contract to the consumers and 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 process could purchase post-paid mobile products. This included falsely indicating that a consumer was employed when they were not.

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

“We expect much better behaviour from large businesses like Telstra,  but all businesses in Australia have a responsibility to ensure sales staff are not breaching consumer law by manipulating or tricking consumers into buying products or services they do not need or cannot afford,” Sims said.

Telstra admitted liability, cooperated with the ACCC’s investigation and made joint submissions with the ACCC to the Court in relation to penalty and other orders.

 

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