Telstra cops full $10 million fine over unexpected bills

Telstra has agreed to pay the full $10 million for misleading mobile customers about charges from third parties that were billed by its premium direct billing (PDB) service.

The service was offered to Telstra's mobile customers, allowing them to purchase online content like apps, games and entertainment from third parties with charges showing up on their phone bills. However, some third parties signed up close to 100,000 customers without consent or requesting payment details or identity verification.

The Australian Competition and Consumer Commission (ACCC) estimates that Telstra earned up to $61.7 million on commissions from 2.7 million mobile customers.

Last month, Telstra agreed to submit to the federal court that it should pay a penalty for how the service was managed up to $10 million. Telstra ended the service in August last year.

The court ruled that Telstra didn't adequately inform its customers that PDB services were activated by default on their account, leaving customers vulnerable to unintentional purchases they didn't want.

"By introducing and operating the Premium Direct Billing service, Telstra generated substantial profits by exposing customers to unauthorised charges,” said ACCC chairman Rod Sims.

“Telstra was aware that children were at risk of inadvertently subscribing on a family member’s phone. The $10 million penalty imposed by the Court recognises the seriousness of Telstra’s conduct. In the ACCC's view, such conduct falls below community expectations for appropriate corporate behaviour.”

Telstra agreed to refund affected customers and has already handed back an estimated $5 million. The ACCC said that several million dollars more in refunds may be needed.

The telco apologised last month, and said it would continue to assess complaints about the service, as well as contact and offer refunds to affected customers.

"It is clear for this specific type of service, we did not get that right,” said Telstra consumer and small business group executive Vicki Brady.

“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."