Optus Faces $100 Million Penalty for Unconscionable Sales Targeting Vulnerable Consumers
Australia's second-largest telecommunications provider Optus has agreed to pay a $100 million penalty for unconscionable conduct after admitting its sales staff deliberately targeted vulnerable consumers with expensive phones and contracts they could not afford or use.
The Australian Competition and Consumer Commission announced Wednesday that Optus Mobile Pty Ltd admitted to engaging in unconscionable conduct when selling telecommunications products to more than 400 consumers across 16 stores between August 2019 and July 2023.
Many affected consumers were Indigenous Australians from remote areas, people with mental disabilities or cognitive impairments, financially disadvantaged individuals, and those with limited English proficiency.
"The conduct, which included selling inappropriate, unwanted or unaffordable mobiles and phone plans to people who are vulnerable or experiencing disadvantage is simply unacceptable," ACCC Deputy Chair Catriona Lowe said.
The Federal Court must approve the proposed penalty before it takes effect. If approved, it would represent the largest telecommunications penalty in Australian consumer law history.
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Systematic Targeting of Vulnerable Groups
According to the ACCC, Optus sales staff systematically pressured vulnerable consumers into purchasing multiple expensive products they neither wanted nor needed. The conduct occurred across stores in Darwin, Mount Isa and other locations nationwide.
Sales staff failed to explain contract terms in ways vulnerable consumers could understand, sold products without coverage at customers' addresses, and misled consumers about costs and payment obligations.
"Many of these consumers who were vulnerable or experiencing disadvantage also experienced significant financial harm," Lowe said. "They accrued thousands of dollars of unexpected debt and some were pursued by debt collectors, in some instances for years."
The ACCC detailed several egregious examples. One First Nations consumer from a remote community with no Optus coverage was pressured into contracts worth $4,348 over 24 months for products they believed were free. Staff falsified information during credit checks and the consumer was later pursued by debt collectors.
Another consumer with an intellectual disability visited a store to purchase a $20 prepaid recharge but was pressured into contracts worth over $8,000 over 36 months. Staff manipulated credit checks and added false business information to their account.
Mount Isa Store Fraudulent Activities
The Mount Isa store, which has since closed, presented particularly serious misconduct. An internal 2019 Optus investigation found the store manager had falsified identification documents and used First Nations consumers' identities without their knowledge to create 82 fraudulent contracts.
Despite being aware of this fraud through senior management, Optus continued to pursue debts related to these contracts through third-party collection agencies. Some consumers faced threats of legal action and credit defaults for debts they never incurred.
"We are particularly concerned that Optus engaged debt collectors to pursue some of these consumers after it had launched internal investigations into the sales conduct," Lowe said.
Some affected consumers continued being pursued by debt collectors until July 2024, nearly five years after the fraudulent conduct was identified.
Commission Structure Incentivized Misconduct
The ACCC found that commission-based sales arrangements incentivized inappropriate conduct. Despite telecommunications industry codes recommending against commission-based selling due to vulnerability risks, Optus maintained these structures throughout the relevant period.
Optus management became increasingly aware of the inappropriate practices but failed to implement adequate controls to prevent the conduct from continuing.
Remediation and System Changes
Under an undertaking accepted by the ACCC, Optus has committed to comprehensive remediation measures. The company has begun compensating affected consumers and will donate $1 million to organizations promoting digital literacy among First Nations Australians.
Optus will restructure sales staff remuneration to remove incentives for similar conduct, improve complaint handling procedures, and enhance staff training programs.
The company has also commenced buying back 34 licensee stores in the Northern Territory, Queensland and South Australia to improve oversight and control.
Consumers who believe they may have been affected can contact Optus's specialist customer care team at 1300 082 820.
Previous Industry Action
This case follows similar ACCC action against Telstra, which paid a $50 million penalty in May 2021 for unconscionable conduct involving 108 Indigenous consumers between 2016 and 2018.
The Optus investigation was prompted by a referral from the Telecommunications Industry Ombudsman, highlighting the importance of industry oversight mechanisms.
The ACCC acknowledged the crucial role of advocates, financial counselors and carers who assisted affected individuals throughout the investigation process.
The undertaking will take effect once the Federal Court makes final orders approving the settlement agreement.
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