Telstra fined $50m for exploiting Indigenous mobile phone plan customers

Telstra has been ordered to pay $50m in fines for signing up more than 100 Indigenous Australians to mobile phone contracts they did not understand and could not afford.

Between January 2016 and August 2018, Telstra sales staff in five stores in the Northern Territory, South Australia and Western Australia signed 108 Indigenous Australians up to post-paid mobile contracts. Many of those signed up for plans were from regional or remote Indigenous communities, who spoke English as a second or third language.

The Australian Competition and Consumer Commission took the telco to court in November last year, alleging a breach of consumer law. The federal court ruled on Thursday the customers were subject to exploitative practices from the sales staff, including signing up customers to more than one contract in a day, not explaining the full costs, manipulating credit assessments, and exploiting the customer’s lack of understanding of the terms.

The court found sales staff also took advantage of the cultural propensity of Indigenous Australia people to express agreement as a means of avoiding conflict.

The customers then had debts to Telstra on an average of over $7,000, with the highest debt amounting to over $19,000. One customer withdrew from their super to pay down the debt to Telstra.

Telstra subsequently cleared close to $1m in debts, including in some cases buying back debts where it had passed it on to debt collectors.

The federal court ruled on Thursday that the tactics were exploitative, and enforced the $50m fine Telstra agreed to pay when the ACCC first launched court action.

It is the second-highest fine ever issued under Australian Consumer Law, and Justice Debra Mortimer said it was appropriate to send a message.

“A significant penalty is necessary to send a strong and clear message to all those who might be tempted to take advantage of vulnerable consumers in similar ways,” she said. “Even for a corporation the size of Telstra, it is a significant sum.”

ACCC chair Rod Sims said Telstra’s board and executives did not act quickly enough to stop the practices when they were alerted to them.

“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 chief executive Andy Penn said it was “a deeply challenging and disappointing chapter” in the company’s history and the company had now set up an Indigenous hotline, as well as an Indigenous cultural compliance officer. It is now mandatory for staff who come into contact with Indigenous Australians to have cultural sensitivity training, he said.

“It is clear we need to better understand and support our Indigenous customers. That means spending time on Country, as I have done, on several occasions since this issue came to light and will continue to do as well as listening to and learning from Indigenous customers and communities, meeting with community leaders, Elders, and Indigenous organisations,” he said.