Telstra overcharges customers $30 million, but escapes with a formal warning

Telecommunications giant Telstra has been formally warned after investigations revealed it had overcharged more than 250,000 customers $30 million.

The incorrect billing took place between 2006 and 2012, but the telco didn’t investigate the situation until last year.

The Australian Communications and Media Authority investigated the overcharges following self-reporting by Telstra.

The excessive bills occurred when the customers used international data roaming and incurred multiple ‘flagfall’ fees for single data sessions.

Flagfall fees are initial fixed fees. These are also often charged for phone calls.

Telstra first became aware of the issue in early 2009 by a customer who had been incorrectly billed for overseas data usage.

The breach occurred because of a third-party contractor, but ACMA authority member Chris Cheah told SmartCompany that because Telstra was aware of the problem and didn’t investigate it until 2012, it was at fault.

“During investigations it was obvious it was caused by a third party, but its mistake was not looking into it back in 2009. When it finally looked at it in 2012, it had a problem,” he says.

“While the code says billing accuracy provisions don’t apply when a third party is at fault, this only applies when the business has no knowledge of what’s going on.”

Telstra said overseas carriers had not provided it with the right information, but admitted fault in terms of incorrectly charging the customers.

Cheah says it’s critical for telecommunications businesses to follow up on customer complaints to ensure they’re not in breach of the Telecommunications Consumer Protection Code.

During the six-year period, 260,000 Telstra customers who travelled overseas were overcharged.

Telstra charges a 50 cent flagfall fee when someone connects to the internet while overseas, but it was found customers had been charged multiple times for single sessions.

This was the first time a billing issue of this nature was investigated by the ACMA.

A spokesperson for Telstra told SmartCompany it accepts the ACMA finding.

“Once we identified it [the incorrect charges] we put in place immediate steps to prevent it happening again. We also proactively notified the ACMA and began a process to fully refund customers and to apologise for this happening in the first place,” the spokesperson said.

The ACMA issued Telstra with a formal warning for the breaches, but says it was unable to issue any other type of penalty.

“The ACMA isn’t in a position to give a fine. There were three options – come to an informal agreement, issue a formal warning or thirdly give a direction to comply with the code,” he says.

“Had we been able to fine them, the question then would have been do we want to.”

Cheah says while Telstra had knowledge of the problem years before investigating, it took steps to rectify the mistake.

“Firstly they self-reported to us, secondly they have put in place a compensation scheme and thirdly they’ve now made changes to their system and they’ve fixed the problems,” he says.

When the breach was investigated in 2012, Telstra also temporarily ceased charging all flagfall fees until the problem was rectified.

Cheah says when making a decision about what type of order it will give, the ACMA looks into the circumstances to determine whether or not there are systemic issues.

“In the past we gave Telstra a direction to comply in regard to the privacy provisions in the code because Telstra was up to three breaches of these provisions,” Cheah says.

“They’d developed enough of a pattern to warrant a direction to comply.”