Telstra admits to unconscionable conduct, faces $50m fine for 'exploiting' Indigenous consumers

Telstra has admitted to unconscionable conduct during its sales of mobile phone plans to Indigenous consumers and could face a penalty of up to $50 million.

The telco admitted it had breached Australian consumer law and today the Australian Competition and Consumer Commission (ACCC) announced it was instituting Federal Court proceedings against the company.

Today's announcement comes after an 18-month investigation by the ACCC, after serious concerns were raised by a number of financial counsellors in rural and remote areas.

Last year, financial counsellors told the ABC consumers were being sold unaffordable phone plans and were then aggressively pursued by debt collectors.

"Sales staff at five licensed Telstra-branded stores signed up 108 Indigenous consumers to multiple post-paid mobile contracts which they did not understand and could not afford between January 2016 to August 2018," the ACCC said in a statement.

In each case, these contracts were entered into with individual consumers on a single day when they visited a store.

The ACCC said Telstra had agreed to consent orders that would support a penalty totalling $50 million, but ultimately, it would be up to the court to decide how much Telstra should pay.

"This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers," ACCC chair Rod Sims said.

"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.

"These practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers."

Average debt $7,400 per customer

One young Indigenous woman from Broome told the ABC she feared she would go to jail when she received legal threats from a debt collector over her outstanding Telstra bill.

The ACCC said many of the customers being pursued by Telstra only spoke English as a second or third language.

The regulator said many were unemployed and were on welfare and lived in remote areas where Telstra was the only mobile phone provider.

The average debt per consumer was more than $7,400.

Telstra chief apologies

Telstra chief Andrew Penn apologised for the company's "failings".

"I have spoken often about doing business responsibly, including about these failings, since earlier this year. I am determined we have a leadership position and hold ourselves accountable in this regard," he said.

"While it was a small number of licensee stores that did not do the right thing, the impact on these vulnerable customers has been significant and this is not OK.

"We have taken steps to provide full refunds with interest, waived debts and allowed most customers to keep their devices to help make things right."

Mr Penn said Telstra's remediation program for the 108 customers was in addition to the proposed $50 million penalty which was provisioned for in the company's full year results in August 2020.

"This included appointing a customer advocate to help us better identify and respond to such issues, working more closely with community representatives and financial counsellors, and shortly introducing a specific call centre in the Northern Territory which will also assist our Indigenous customers," Mr Penn said.