The Australian Competition and Consumer Commission (ACCC) started proceedings in the Federal Court on Thursday against Telstra, over the telco improperly signing up 108 Indigenous Australians to postpaid mobile contracts.
The telco had previously admitted to the conduct, refunded customers with interest, and waived the debts which averaged AU$7,400 per customer.
Many of those signed to the contracts were unemployed, with the ACCC stating staff in five Telstra licensed stores manipulated credit assessments, such as saying the customers were employed, to sign them up. Once the debts were accumulated, Telstra then referred a portion of them to debt collectors.
"Telstra has admitted that staff at five stores in the Northern Territory, South Australia, and Western Australia used unfair selling tactics and took advantage of a substantially stronger bargaining position when selling post-paid mobile products on behalf of Telstra," the ACCC said.
"Many of the consumers spoke English as a second or third language, had difficulties understanding Telstra's written contracts, and many were unemployed and relied on government benefits or pensions as the primary source of their limited income. Some lived in remote areas where Telstra provided the only mobile network."
Telstra and the ACCC have jointly submitted to the Federal Court that the telco will pay AU$50 million in penalties, pay part of the ACCC's legal fees, and offered to enter into a court enforceable undertaking. The consumer watchdog said it would be the second highest penalty imposed under Australian Consumer Law.
"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, and these practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers.
"These debts significantly impacted the affected individuals. For example, one consumer had a debt of over AU$19,000; another experienced extreme anxiety worrying they would go to jail if they didn't pay; and yet another used money withdrawn from their superannuation towards paying their Telstra debt."
The stores were located in Arndale, Broome, Alice Springs, Casuarina, and Palmerston.
Telstra will inform the ACCC each quarter of the number of customers that have received the compensation on offer from the telco, as well as boost funding for digital literacy in Indigenous communities via its existing community services programs, and review its cultural awareness training for staff.