Finance Your Budget Struggling telco customers take on more debt to avoid disconnection

Struggling telco customers take on more debt to avoid disconnection

Consumers have taken out new loans to pay down large telco debts after companies provided no alternative options. Photo: TND
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Australians have turned to loved ones and taken out new loans to pay off large mobile phone debts during the pandemic.

Many have been forced to pay substantial lump sums despite wanting to compromise through payment plans with their provider, with 28 per cent of customers reporting ‘negative experiences’ in the past four weeks.

A new report from a leading consumer advocacy group claims telcos have been reluctant to help struggling customers and cut them off from accessing hardship policies.

Melbourne woman Ulka, who did not want her full name disclosed, lost her full-time job at the beginning of the pandemic and immediately ran into issues.

She struggled to meet her phone bills as she was placed on the COVID-boosted Youth Allowance while fielding growing medical expenses after recently falling pregnant.

Despite paying her bills on time since buying a phone in July 2019, she fell into nearly $1000 of debt.

In response, her provider withheld its service during Melbourne’s Stage 4 lockdown without notifying her.

Consumers have struggled to access their telco provider’s hardship policies during the pandemic. Photo: Getty

But it was not until Ulka tried calling her doctor that she realised the company had taken drastic action.

“I called them because I had all these appointments I needed to organise, and they told me they had suspended my account and would not resume it until I paid the full amount owing,” she told The New Daily. 

“I did not have that money lying around, so I offered to make a payment plan of $50 a fortnight and they still shut me down, which made me feel like I was a crappy customer.”

The situation almost drove Ulka to take out a no-interest personal loan to recover the debt. But she decided against it after concluding it would increase her financial stress.

Instead, she resorted to buying an affordable phone and plan via Afterpay and is consulting a financial counsellor to defeat her mountain of debt.

“This whole experience has been really upsetting, because I’ve been with my provider for many years and was giving them options to help pay the phone bill, and yet been treated so poorly,” Ulka said.

“They haven’t shown any sympathy and not understanding where people are coming from – so many people have lost their jobs and they’re not willing to take that information into account and help us.”

Customers struggling to meet demands of telcos

The Consumer Policy Research recently found 26 per cent of Australians who had their incomes affected by COVID-19 took on debt through new loans, credit cards or buy-now-pay-later schemes to afford their mounting household costs.

And 13 per cent borrowed money from family and friends.

Ulka’s story comes as the Consumer Action Law Centre (CALC) report urges telcos to be directly regulated by the Australian Communications and Media Authority as they fail to provide “genuine consideration” to customers who are struggling financially.

CALC found customers in grave financial stress were denied appropriate financial hardship from their provider and turned to borrowing from family and friends to make ends meet.

Others who switched providers to reduce their costs were hit with substantial fees or required to pay out the contract in full.

And some Melburnians in Stage 4 lockdown reported being contacted by debt collectors over their outstanding debt.

According to the sector’s COVID-19 hardship policy, all consumers who sought assistance before June 30 can still be covered by principles including waived late fees and interest charges, as well as the ability to modify hardship plans when their circumstances change.

Communications Alliance CEO John Stanton said last week the industry is continuing to work on “improving customer experience” amid rising complaints against the sector.

“We understand that the pandemic continues to have impacts on many Australians. Financial hardship assistance is always available to any customer who needs it,” Mr Stanton said.

According to CALC, the National Debt Helpline has received 282 calls in the year to September from customers whose financial stress was exacerbated by their telecommunications provider.

And recent findings from the Telecommunications Industry Ombudsman revealed 17 per cent of complaints in the September quarter were for providers failing to cancel their service or not meeting a resolution agreed to with the customer.

Consumer Action Law Centre CEO Gerard Brody said despite Australians’ heavy reliance on phone services in the pandemic, telcos had done little to change their policies in response to the growing number of income-hit Australians.

“We have seen telcos raise barriers rather than offer reasonable and appropriate payment arrangements to those who have needed it this year,” Mr Brody said in the report.

According to CALC senior policy officer Brigette Rose, the issue boils down to the telecommunications sector not being classified – and therefore regulated – as an essential service.

Although providers offered customers access to hardship policies at the onset of the pandemic, most were scaled back at the end of April.

Ms Rose said customers had resorted to taking out high-interest loans or credit cards to avoid disconnection down the line.

“In Victoria for instance, the energy sector’s response has been much stronger than the telcos, and it comes down to the telco industry writing its own rules,” she said.

“This fails customers, as companies aren’t required to offer affordable hardship provisions, and instead we’re seeing struggling consumers enter payment arrangements with no possibility of affording them.

“And any commitments not to disconnect people were tied to a person being compliant with their hardship arrangements.”

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