Telstra fined $50m for dodgy sales tactics

Telstra has been fined $50 million for exploiting vulnerable Indigenous customers
Telstra has been fined $50 million for exploiting vulnerable Indigenous customers

Telstra has been fined $50 million for exploiting vulnerable Indigenous customers by signing them to mobile phone contracts they did not understand and could not afford.

Sales staff at five stores in South Australia, Western Australia and the Northern Territory signed 108 Indigenous people up to post-paid contracts between January 2016 and August 2018.

Federal Court Justice Debra Mortimer on Thursday ordered the telco giant pay $50 million for unconscionable conduct, making it the second-biggest penalty imposed under Australian consumer law.

Many of the Indigenous people signed up did not speak English as their first language, and had limited financial and literacy skills to understand the contracts.

Justice Mortimer said this lack of understanding was exploited by Telstra staff, who took advantage of Indigenous people's cultural propensity to express agreement as a means of avoiding conflict.

Many were unemployed and relied on government benefits. In some cases, they were misled to believe they would receive phones for free and sold unnecessary add-ons they did not want.

Credit assessments were manipulated so people who would not have otherwise passed Telstra's financial approvals process were able to enter into contracts.

Each customer ended up owing $7400, on average.

One ended up more than $19,000 in debt, another was worried they'd be jailed for missing payments and one used their superannuation to cover their phone bill.

Telstra last year admitted unconscionable conduct. The $50 million figure was agreed between the telco and the Australian Competition and Consumer Commission, but still required court approval.

ACCC chair Rod Sims said Telstra executives failed to act quickly enough to stop these illegal practices when 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," Mr Sims said in a statement.

He told reporters in Sydney he accepted the company's contrition was genuine, but it took "way too long" to deal with the problem when financial counsellors brought it to Telstra's attention.

"If we find behaviour like this from other telecommunications companies we will come down very hard on them," he said.

Telstra chief executive Andy Penn said the company was continuing to remediate customers.

"I am deeply and personally disappointed that we have let you down. We should have listened more carefully. We should have been more attuned to what was happening. We should have picked this up earlier," he said.

"This brings an end to what has been a deeply challenging and disappointing chapter in our history and one in which we are already taking steps to fix."

The highest-ever penalty imposed under Australian consumer law was $125 million that the Federal Court ordered Volkswagen to pay for making false representations about compliance with diesel emissions standards.

Australian Associated Press