After alerting the Australian Securities and Investments Commission (ASIC) of its failure to provide customers with a product disclosure statement and financial services guide when signing up for mobile phone insurance, Optus will pay back AU$2.4 million.
The telco will write to approximately 500,000 customers affected by the breach of Australian finance laws, which occurred between December 2008 and August 2015.
Optus reported to ASIC that customers were charged with more expensive premiums; did not receive their first month of insurance for free; were incorrectly charged a premium for insurance during the cooling-off period; and were not provided proper information when purchasing over the phone, the regulator said in a statement.
ASIC said compensation would take the form of an account credit for current customers, while former customers who cannot be found would have their refund paid to "a charity assisting with financial literacy".
"It is important that when a business is licensed by ASIC to sell financial products to retail consumers, it ensures that it does so consistently with the representations it has made to consumers, and in compliance with the financial services laws," ASIC Deputy Chairman Peter Kell said.
"Where consumers have suffered a detriment, it is important that remediation is undertaken, and that steps are taken to ensure that the business is operating in compliance with the relevant legal obligations."
Optus has hired an external firm to review its compliance to its obligations, and said it was taking steps to prevent future mistakes, including employee training.
Customers that want to contact the company about the breach, can call 1800 854 349 on weekdays between 8am and 6pm.
The telco said last month it was considering outsourcing back office roles across its HR and finance departments, following on from its April announcement that the company would restructure its Enterprise and Consumer divisions through a series of redundancies.
Optus in May reported a net profit of AU$901 million for the 2015-16 financial year, up 7.1 percent from the AU$841 million recorded for FY15, on earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$2.77 billion and operating revenue of AU$9.12 billion.