Australia’s largest telco faces a A$50m (£27.5m ; $37m) fine over its sale of mobile contracts to vulnerable indigenous customers.
The fines relate to 108 indigenous customers who paid for contracts they could neither understand nor afford.
Australia’s consumer watchdog accused Telstra of “unconscionable conduct” for the sales.
Telstra apologised and agreed to waive debts, refund money paid and reduce the risk of similar conduct in the future.
“This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers,” the chairman of the Australian Competition and Consumer Commission (ACCC) Rod Sims said in a statement.
The ACCC said Telstra admitted that staff at five stores used “unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra”.
The ACCC said sales staff did not provide an adequate explanation of the customer’s financial exposure under the contracts.
In many cases, the customers only spoke English as a second or third language.
Staff also manipulated credit assessments, and in some cases falsely indicated that a customer was employed, so that consumers who otherwise may have failed its credit assessment could enter into post-paid mobile contracts, the ACCC added.
“For example, one consumer had a debt of over A$19,000; another experienced extreme anxiety worrying they would go to jail if they didn’t pay; and yet another used money withdrawn from their superannuation towards paying their Telstra debt,” Mr Sims said.
The contracts left customers with serious debts that they struggled to repay.
The average debt per consumer was more than A$7,400.
The contracts were signed between 2016 and 2018 at licensed Telstra stores in Alice Springs, Darwin, Adelaide, and Broome, in Australia’s far northwest.
Telstra’s senior executives were unaware of the sales practices when they occurred, according to the ACCC, but the company has acknowledged that it had no effective systems in place to detect or prevent this type of conduct.
“It failed to act quickly enough to stop it, and these practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers,” Mr Sims said.
The company also said it would improve its existing compliance program, review and expand its Indigenous telephone hotline and enhance its digital literacy program for consumers in certain remote areas.
“I apologise to those we have failed. We did not get this right and we need to fix that. And for this, I take full accountability,” Telstra’s Chief executive Andrew Penn said in a Tweet.
Mr Penn said he visited some of the affected communities in person earlier this year to better understand the impact of what had happened.
The ACCC said Telstra had agreed to consent to orders that would support a A$50 million penalty, but the matter must first go before Australia’s Federal court.
The penalties would be the second highest ever imposed under Australian Consumer Law.