Telstra has been handed a $50 million fine for exploiting vulnerable Indigenous customers when it signed them to mobile phone contracts they did not understand and could not afford.
Sales staff at five stores in South Australia, Western Australia and the Northern Territory signed 108 Indigenous people to post-paid contracts between January 2016 and August 2018.
Federal Court Justice Debra Mortimer on Thursday fined Telstra for unconscionable conduct.
The $50 million penalty makes it the second-biggest fine imposed under Australian consumer law. Volkswagen’s $125 million “dieselgate” fine in 2019 is Australia’s largest.
Many of the Indigenous people signed up to contracts did not speak English as their first language, and had limited financial and literacy skills to understand the contracts.
Justice Mortimer said this lack of understanding was exploited by Telstra staff, who took advantage of Indigenous people’s cultural propensity to express agreement as a means of avoiding conflict.
Many were unemployed and relied on government benefits. In some cases, they were misled to believe they would receive phones for free and sold unnecessary add-ons they did not want.
Credit assessments were manipulated so people who would not have otherwise passed Telstra’s financial approvals process were able to enter into contracts.
Each customer ended up owing $7400, on average.
One ended up more than $19,000 in debt, another was worried they’d be jailed for missing payments and one used their superannuation to cover their phone bill.
Telstra last year admitted unconscionable conduct. The $50 million figure was agreed between the telco and the Australian Competition and Consumer Commission, but still required court approval.
Peter Gartlan, of Financial Counselling Australia, said the Telstra’s conduct should never have happened.
“The ACCC has now sent a clear message to corporate Australia and other telcos, that this sort of behaviour is not on. It causes harm to individuals and families,” Mr Gartlan said.
ACCC chair Rod Sims said Telstra executives failed to act quickly enough to stop these illegal practices when alerted to them.
“We expect much better behaviour from large businesses like Telstra. But all businesses in Australia have a responsibility to ensure sales staff are not breaching consumer law by manipulating or tricking consumers into buying products or services they do not need or cannot afford,” Mr Sims said.
He added steps had been taken to waive customers’ debts and refund money.
Telstra was contacted for comment.