26 November 2020

Statutory Unconscionability

The ACCC has announced that Telstra has admitted to unconscionable conduct under the Australian Consumer Law regarding sale of post-paid mobile products to 108 Indigenous consumers at Telstra outlets in Alice Springs, Casuarina, Palmerston, Arndale and Broome (WA) between January 2016 to August 2018. Telstra has agreed to the filing of consent orders and joint submissions in the Federal Court in support of aggregate penalties of $50 million being imposed by the Court. 

The admission is that Telstra licensees used unfair selling tactics and took advantage of a substantially stronger bargaining position when selling: many of the consumers spoke English as a second or third language, had difficulties understanding Telstra’s written contracts, 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 average debt per consumer was over $7400.  One consumer had a debt of over $19,000.

The ACCC notes 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. It is a matter for the Court to decide whether these penalties are appropriate. 

 ACCC Chair Rod Sims stated 

Even though Telstra became increasingly aware of elements of the improper practices by sales staff at Telstra licensed stores over time, it failed to act quickly enough to stop it, and these practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers.

The Federal Court will decide whether the orders sought by the ACCC (potentially the second highest total penalties ever imposed under the ACL) are appropriate. 

The ACCC has accepted a court-enforceable undertaking fin 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. Telstra has since taken steps to waive the debts, refund money paid and put in place steps to reduce the risk of similar conduct.