Telstra made $62 million in signing customers up to unwanted services. Picture: AAP
Telstra made $62 million in signing customers up to unwanted services. Picture: AAP

Telstra admits to $62 million customer rip-off

TELSTRA had admitted it misled customers to the tune of $62 million after it signed up as many as 100,000 customers for ringtones, gaming and other digital content.

The consumer watchdog has started proceedings against Telstra, after the nation's largest telco both permitted and profited from a third party billing service that allegedly billed customers without their knowledge or consent.

"Many Telstra customers paid for content they did not want, did not use, and had difficulty unsubscribing from," Australian Competition and Competition Commission (ACCC) Chairman Rod Sims said.

After shutting down the service on March 3, Telstra and the ACCC today agreed to jointly submit to the federal court that Telstra pay a penalty relating to its Premium Direct Billing service that over two years led to possibly 100,000 users being billed for unknown purchases.

Mr Sims said Telstra had so far reaped $62 million in revenue from 2.7 million mobiles.

The ACCC says during 2015 and 2016, thousands of Telstra mobile phone customers unwittingly signed up to subscriptions or charges with third parties, without being required to enter payment details or verify their identity, using Telstra's third-party billing service.

Charges were automatically applied to Telstra customers' prepaid or postpaid mobile accounts.

"Telstra knew that the Premium Direct Billing service it operated led to large numbers of its customers being billed for purchases made without their knowledge or consent.

Despite this, Telstra continued to bill customers, making substantial revenue from the service at the expense of customers," Mr Sims said.

Customers who noticed the charges and contacted Telstra to complain were directed to the third party billers, even though Telstra knew of how hard it was to squeezed refund - or a subscription cancellation - out of them, Sims said.

"Customers were often left frustrated and out of pocket as a result of Telstra's conduct," Sims said.

The ACCC says Telstra ailed to have the right safeguards in place for customers. It added that Telstra's conduct contravenes the ASIC Act, as it concerns financial services and/or financial products.

Telstra has started refunding customers but "admitted that refunding affected customers has proven to be difficult", the ACCC said.

"Telstra has acknowledged its internal processes for dealing with these issues were inadequate and will refund customers affected by this conduct."

Telstra says it has already provided $5 million in refunds and will contact customers it identified. It has stopped operating the PDB service entirely.

But fear not: your Netflix is safe. While Telstra has removed all third party services, Telstra content including Apple Music, Netflix, AFL and Foxtel/Now/Go, remains unaffected. That content will continue to be charged to a customer's postpaid bill, or debited from their prepaid credit balance as normal.

If you believe unauthorised charges have been applied under the PDB service, you should contact Telstra to seek a refund. The telco has agreed to deal directly with complaints, and refund where it's clear the customers were signed up to PDB content without their knowledge or consent.

Telstra's Group Executive of Consumer and Small Business, Vicki Brady, said third party billing had been introduced by a number of mobile providers "to give customers a convenient way of charging certain types of online services to their phone bill".

"It is clear for this specific type of service, we did not get that right," Ms Brady said.

"PDB services have been recognised as an issue for the broader telecommunications industry - Telstra took a number of steps to improve our processes but acknowledge we could have done more and done it faster," she added.

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