Telstra misled customers over premium billing charges

Australia’s biggest telco is in hot water with the consumer watchdog over claims that it made false or misleading representations about its premium billing service.

The Australian Competition and Consumer commission (ACCC) has commenced proceedings against Telstra, under delegation of power from the Australian Securities and Investment Commission (ASIC), alleging that the telco misled customers about its ‘Premium Direct Billing’ (PDB) service.

Telstra has been operating the service since July 2013. It allows customers to purchase digital content from third-party developers that sell their content outside usual app marketplaces such as Google Play and the App Store.

The ACCC says that customers were unwittingly charged for premium services they had not consented to using from 2015-2016.

ACCC Chairman Rod Sims said: “Telstra has admitted that it misled customers by charging them for digital content, such as games and ringtones, which they unknowingly purchased. Many Telstra customers paid for content they did not want, did not use and had difficulty unsubscribing from.

“Telstra knew that the Premium Direct Billing service it operated led to large numbers of its customers being billed for purchases without their knowledge or consent. Despite this, Telstra continued to bill customers, making substantial revenue from the service at the expense of customers.”

Until October 2017, Telstra had earned about $61.7m in net revenue from commissions on premium billing services charged to more than 2.7 million mobile customers.

The ACCC is monitoring complaint levels regarding other carriers and their own premium services and has stated that it will take enforcement action where necessary.

Who is affected?

The ACCC has highlighted that more than 2.7 million Telstra mobile customers could be affected, but family members of those accessing a Telstra phone plan could have also unwittingly used a premium service.

The ACCC says family members of phone plan holders – such as children – were at risk of inadvertently subscribing to premium content. It is also alleged that Telstra failed to implement verification safeguards to authorise premium charges, such as entering a PIN or signing into an account.

The response from Telstra has previously been unsatisfactory, according to the ACCC.

“When customers contacted Telstra to complain, many were directed to third parties, even though Telstra knew that they had difficulty getting a refund from the third party suppliers or cancelling their subscription. Customers were often left frustrated and out of pocket as a result of Telstra’s conduct,” Mr Sims said.

Telstra has allegedly been aware of the issue since early 2015 because it received a large number of calls disputing such charges after customers had unintentionally used premium services. Telstra has admitted that between 2015 and 2016, more than 100,000 may have been affected.

Telstra has agreed to offer refunds to affected customers who have already complained to the Telecommunications Industry Ombudsman or to the telco directly.

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