26 April 2013

Telco created fake debt collector to make 'outrageous' demands

An Australian telecommunications company that created a sham independent complaints hotline and sent letters pretending to be a fictitious debt collector has engaged in "false, misleading and unconscionable conduct," the Federal Court of Australia has found.

Excite Mobile's conduct affected "a large number of consumers" across the country, including an unknown amount of people in Western Australia, Queensland and the Northern Territory, according to the Australian Competition and Consumer Commission.

Excite's mobile phone plans, which used the Optus Network, were initially flagged by the Indigenous Consumer Assistance Network.

In December 2011, following an investigation by the ACCC, proceedings were launched against Excite Mobile in the Federal Court of Australia sitting in South Australia.

Federal Court Judge John Mansfield handed down his judgment on Thursday, making adverse findings against Excite Mobile for several forms of "unfair", "unconscionable" and "misleading" conduct.

The company and three individuals, including directors Obie Brown and David Samuel, were misleading about an internal complaints handling department they had created to limit customers filing complaints with the independent Telecommunications Industry Ombudsman, the court heard.
To this end, the company had established its own organisation called "Telecommunications Industry Complaints".

Judge Mansfield found there was nothing "sinister" about trying to address complaints internally, but the company had made representations that it's "TIC" was independent from Excite.

"The evidence indicated that some consumers were deliberately misled by being told that TIC was independent of Excite Mobile," he said.

Excite Mobile also created a fake independent debt collector called Jerry Hastings, who it used to write threatening letters to at least 1074 customers, Judge Mansfield found.

"Jerry Hastings as used by Excite Mobile is, I find, a fictitious character and one created to be seen as separate from Excite Mobile," Judge Mansfield said in his judgment.

"By creating and sending the Jerry Hastings letters, Excite Mobile engaged in conduct which was misleading, deceptive and likely to mislead and deceive."

As well as being misleading, the letters used "undue coercion" against customers and made false representations about the remedies available to them, Judge Mansfield found.

The remedies Excite claimed while pretending to be the debt collector included demands for 20 per cent of the customers' original debt for late payment and the repossession of all assets, including children's toys.

"The letters were not from a debt collector or a representative of a debt collector but were created and sent by Excite Mobile," Judge Mansfield wrote in his judgment.

There were also problems with the contracts themselves, Judge Mansfield found.

The company had enforced a "day cap" clause, which in some cases meant a customer could only make a two-minute call each day before facing fees in excess of the $33 monthly contract charge, something not made clear to customers when they were sold the plans.

"I consider the sales method adopted by Excite Mobile for promotion of its day cap plan was in all the circumstances unconscionable," Judge Mansfield said.

"It was not a plan which was suitable for most users of mobile telephones, for obvious reasons.
"One may ask rhetorically whether the consumer would have been interested if they had been told that everyday normal usage of the mobile phone under the plan was likely to increase the monthly charges quite significantly."
Some customers, largely those in remote communities, were also falsely told they could get coverage at their home address, where there was no Optus network coverage available, the court heard.

Judge Mansfield also found a $75 "cool-off" fee and a $195 charge for returning a phone if the box was damaged to be unconscionable or unfair.

ACCC chairman Rod Sims said the judgement was a "landmark" for unconscionable conduct.
"The conduct of Excite Mobile was outrageous," Mr Sims said in a statement on Monday.

"Inventing a fictitious complaints handling body to deceive customers and creating a fictitious debt collector to coerce the customer to pay an alleged debt to Excite Mobile is unjustifiable and unacceptable."

Excite Mobile faces fines of up to $1.1M for each breach of trades legislation, an ACCC spokesman said.

The ACCC are seeking injunctions and pecuniary penalties, which would include orders Mr Brown and Mr Samuel be disqualified from managing a corporation for five years.

Excite Mobile's website appears to have been taken down.

The Australian Securities and Investment Commission has started deregistering Excite Mobile, which operated from 2008 to 2011, but has deferred the process following a request from the ACCC pending the outcome of this proceeding.

theage.com.au 22 Apr 2013

Excite is NOT the only dodgy telco operating.

Telstra, the industry's monopoly is also committing fraud against its customers, but there literally is no action against Telstra.

The practice of debt collection is also illegal, but this will be posted in another article at a later date.

1 comment:

Unknown said...

This is so illegal. Its now high time that ACCC should start taking actions against frauds. There are many people around who have Excite's mobile phone plans. Everybody suffers because of such fake debt collector. Strict actions are inevitable.