Telstra admits to misleading customers, faces heavy penalties

Telstra admits to misleading customers, faces heavy penalties

The ACCC has commenced proceedings against Telstra, under a delegation of power from ASIC, alleging that it made false or misleading representations to consumers in relation to its third-party billing service known as Premium Direct Billing.

Telstra has admitted that it made these representations and agreed to consent to orders in the Federal Court, including declarations that Telstra breached the ASIC Act, and to make joint submissions in relation to the imposition of pecuniary penalties totalling $10 million.

Telstra has also committed to offer refunds to affected customers.

The Federal Court will decide at a later date whether the orders sought, including the proposed penalties, are appropriate.

During 2015 and 2016, thousands of Telstra mobile phone customers unwittingly signed up to subscriptions or charges with third parties, without being required to enter payment details or verify their identity.

Telstra has admitted that more than 100,000 customers may have been affected and charged.

ACCC Chairman Rod Sims said that Telstra admitted to misleading customers by charging them for digital content - such as games and ringtones - which they unknowingly purchased.

“Many Telstra customers paid for content they did not want, did not use, and had difficulty unsubscribing from,” he said.

“Telstra knew that the Premium Direct Billing service it operated led to large numbers of its customers being billed for purchases made without their knowledge or consent. Despite this, Telstra continued to bill customers, making substantial revenue from the service at the expense of customers.”

Mr Sims said that customers were often left “frustrated and out of pocket” as a result of Telstra’s conduct.

“When customers contacted Telstra to complain many were directed to third parties, even though Telstra knew that they had difficulty getting a refund from third party suppliers, or cancelling their subscription.”

Telstra has acknowledged its internal processes for dealing with these issues were inadequate and will refund customers affected by this conduct.

Telstra estimates it has provided refunds of at least $5 million, and it will review any future complaints in light of this action and deal with those customers in good faith.

The ACCC estimates further refunds may be in the order of several million dollars.

As part of this resolution, Telstra has ceased operating the PDB service entirely.

Mr Sims also said that the ACCC is aware that other carriers offer similar third-party billing services.

“We are monitoring complaint levels and will take enforcement action in relation to these carriers if we believe they are breaching the law.”

Telstra admits to misleading customers, faces heavy penalties
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