A new survey by Financial Counselling Australia (FCA) has revealed that financial hardship policies and practices by Australian telcos are poor, and as a result, more than 50% of customers are struggling to pay off their debts.
The FCA’s Telcos and financial hardship: Feedback from the frontline report [PDF] indicated that when Australian financial counsellors were surveyed and asked to rate the hardship policies and practices of the country’s major telcos — Telstra, Optus, and TPG/Vodafone — as well as smaller telcos on a scale of 1-10, they all received a rating of less than 7. Telstra scored 6.2, Optus 5.6, TPG/Vodafone at 4.4, and smaller telcos at 3.5.
According to the FCA, it considered rates of 7 or above as “acceptable”.
“These ratings therefore are poor,” it noted. “For example, financial counsellors said it was common that hardship arrangements offered by telcos to their customers were not affordable.”
The report also looked at how many clients of financial counsellors were struggling to pay their telco debts. It revealed counsellors said more than 50% of clients were struggling to pay their telco debt.
The survey further revealed that when comparing telco hardship practices to the big four banks, non-major banks, and electricity retailers, telcos were rated as “much worse” or “worse”. The telco sector had better hardship practices than the Buy Now, Pay Later industry, however.
When counsellors were asked about the extent of mis-selling by Australian telcos, they revealed that approximately 80% of clients have been mis-sold telco products.
“A strong theme was that vulnerable people — including First Nations people, people with disabilities or mental health issues, refugees and people whose first language is not English, or people with low financial or digital literacy — are being sold multiple devices and/or plans which are unaffordable and they do not understand,” the report said.
Some of the specific feedback that was provided included an instance where a client’s illiterate grandparents were sold the most advanced iPhone on plans that often show zero uses. Another said they had an intellectually handicapped client who was continuously offered a new or additional product after phoning in to tell their telco they could not afford to pay their monthly account.
In terms of whether financial support provided during the coronavirus pandemic by telcos in 2020 improved or not, 54% indicated that it had “stayed the same”.
Off the back of the findings, Communications Alliance CEO John Stanton said there is still room for improvement.
“Telcos are always seeking to improve the customer experience, particularly for those experiencing hardship. We appreciate the role that financial counsellors play in providing feedback on how we are doing and in challenging us to do better,” he said.
He also took the opportunity to call on the federal government to improve funding for financial counselling.
“There are significant opportunities to solve existing problems of funding timing and administrative burden for financial counsellors, and while doing so to gather national data on the drivers of financial counselling. We strongly encourage government to continue working on these challenges,” he said.
Tighter controls around selling practices and credit assessments were introduced mid-2019 under a revised Telecommunications Consumer Protections (TCP) Code.
In November, the Australian Competition and Consumer Commission (ACCC) started proceedings in the Federal Court against Telstra, over the telco improperly signing up 108 Indigenous Australians to postpaid mobile contracts.
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.
The telco had previously admitted to the conduct, refunded customers with interest, and waived the debts which averaged AU$7,400 per customer.
Prior to this, the company’s chief Andy Penn announced Telstra would commit to a series of changes to provide “vulnerable customers” access to services, while taking into consideration their current financial position.
Those changes included launching a new mobile plan aimed at low income customers, wiping debts of customers in “high risk postcodes”, and rolling out tools and training around cultural awareness to assist frontline staff in their interactions with “vulnerable customers”, including the needs of Indigenous Australians.
Other focus areas for the company, Penn said, included improving credit processes and controls; the way customer data is used to detect potential issues with sales and service practices; and its ability to identify and respond to the needs of those it considers vulnerable customers.
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