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Optus Mobile is facing legal action brought by the consumer watchdog for taking advantage of hundreds of vulnerable customers, many of them in remote indigenous communities, by allegedly pushing them into buying goods and services they didn’t need and then chasing them for debts these products created.
The Australian Competition and Consumer Commission (ACCC) has launched Federal Court proceedings against Optus alleging unconscionable conduct in contravention of the Australian Consumer Law.
The consumer authority says that many of the customers affected were experiencing vulnerability or disadvantage, such as living with a mental disability, diminished cognitive capacity or learning difficulties, being financially dependent or unemployed, or having limited financial and legal literacy.
The ACCC notes a significant proportion of those impacted were First Nations Australians from regional and remote areas or people from culturally and linguistically diverse backgrounds.
“We allege Optus’ conduct disproportionately impacted consumers experiencing vulnerability and/or disadvantage, and that these practices were incentivised by the commission-based remuneration for sales staff,” says ACCC chair Gina Cass-Gottlieb.
“In some cases, we allege Optus took steps to protect its own financial interests by clawing back commissions to sales staff but failed to remediate affected consumers.
“This case concerns allegations of very serious conduct, as our case is that Optus sold goods to consumers experiencing vulnerability which they did not need, did not want and could not afford.”
Cass-Gottlieb says the ACCC also alleges that the unconscionable conduct by Optus continued after management became aware of deficiencies in its systems that were being exploited by sales staff and despite this failed to implement resolutions to the issues.
The ACCC’s case against Optus involves the company’s dealings with about 429 consumers that involved Optus engaging in “inappropriate sales conduct and/or pursuing consumers for debts, including when it knew contracts were created fraudulently”.
The conduct included Optus allegedly putting undue pressure on some of these consumers to buy a large number of products, including expensive phones and accessories, and not undertaking coverage checks to inform the consumer whether they would have Optus coverage where they lived.
It is alleged that Optus engaged debt collectors to pursue many of these consumers, despite knowing that they were subject to inappropriate or fraudulent sales conduct.
The alleged conduct involves 363 consumers from two Optus Darwin stores, 42 consumers from the Optus Mount Isa store and 24 individual consumers from store locations across Australia.
The ACCC alleges that at two licensee-operated Optus stores in Darwin, nearly all staff engaged in inappropriate sales conduct, encouraged by senior store management, during a two-year period to June 2023.
The conduct included not carrying out coverage checks, despite some of the 363 impacted consumers being First Nations Australians from regional, remote and very remote parts of the Northern Territory where there was no Optus coverage available.
The ACCC also alleges that Optus acted unconscionably in its dealings with 24 individual consumers by applying undue pressure and inducing the consumers to purchase a large number of goods and services.
The alleged conduct includes claims that sales staff manipulated credit-check results without the consumers’ knowledge to sell goods and services that they could not afford, while failing to explain the terms and conditions of contracts in an understandable manner.
Despite knowing about this alleged conduct, Optus is alleged to have pursued debt collection activities in many cases and referred and sold the consumers’ debts to third-party debt collection agencies.
“We are taking this action against Optus and seeking consumer redress in relation to the hundreds of consumers affected by this alleged unconscionable conduct,” says Cass-Gottlieb.
“Many consumers suffered financial harm, incurring thousands of dollars of debt and non-financial harm, such as shame, fear, and emotional distress about the debts or being pursued by debt collectors.”
The ACCC launched its investigation into Optus after the Telecommunications Industry Ombudsman raised concerns about the company’s sales practices.
The ACCC is seeking declarations and orders for penalties, non-party consumer redress, publication orders, a compliance program and costs.
Meanwhile, Communications Alliance, an organisation that represents the Australian communications industry, has described unconscionable conduct in sales, especially to vulnerable customers, as “unacceptable behaviour”.
“The court proceedings announced by the ACCC are a clear reminder that telcos are subject to strong direct regulation with the possibility of heavy penalties, in this case through the Australian Consumer Law,” says Communications Alliance CEO Luke Coleman.
However, Coleman says calls for tighter regulation of the industry following the Federal Court action by the regulator “miss the point”.
“Existing laws are working exactly as they should. Australian regulators are tigers with teeth - they have strong enforcement powers, and they are not afraid to use them.
“Previous enforcement action for unconscionable sales includes the second-highest penalty ever imposed under the Australian Consumer Law.”
Coleman is referring to a 2021 Federal Court decision to hand Telstra a $50 million penalty for engaging in unconscionable conduct when it sold mobile contracts to more than 100 indigenous consumers.
“Even with these laws in place, industry is taking further action to strengthen consumer protections around sales practices,” he says.
Coleman notes that the alliance is currently updating the Telecommunications Consumer Protection Code, with a new focus on responsible sales practices, including consumer remedies to claw back sales incentive payments when breaches are identified.
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