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Telstra (ASX:TLS) cops $50 million fine, share price drops

Telstra Corporation Ltd (ASX:TLS) has copped a $50 million fine and the share price dropped in reaction to the unconscionable conduct.

Telstra Corporation Ltd (ASX: TLS) has copped a $50 million fine and the share price dropped in reaction.

Why did Telstra get a $50 million fine?

As reported by the ABC, the Federal Court has judged that Telstra will pay a penalty of $50 million (and costs) due to its unconscionable treatment of indigenous customers in rural and remote customers.

The issue relates to selling phone plans to 108 customers that people couldn’t afford and didn’t understand.

Telstra admitted to unconscionable conduct after the Australian Competition and Consumer Commission (ACCC) investigated the telco giant.

The ABC was the news organisation that first revealed and reported on this issue a couple of years ago.

How big of a deal is this fine? It’s the second largest ever for breaking consumer law according to the ABC reporting. The biggest was to Volkswagen for the diesel scandal.

What did Telstra specifically do?

Telstra staff manipulated credit assessments to ensure customers would pass credit checks, signed up customers to multiple plans in one day, “exploited” customers’ lack of understanding of the terms and conditions, made it seem as though they’d be getting devices for free, sold extras to customers that were unwanted (or told they would be free). The final bad conduct was that staff took advantage of a “cultural propensity for Indigenous Australian people to express agreement as a means of avoiding conflict”.

These customers then got into debt of between $1,600 to almost $20,000. The customers were pursued by debt collectors.

How will the telco make up for this?

Telstra has made full remediation to the affected customers. It is also offering remediation to any impacted customers between 2016 and 2018 that haven’t come forward yet.

The telco has said it has organised staff training as well as a call centre for indigenous customers in remote communities, according to the ABC.

The ABC quoted the Telstra CEO Andy Penn, who said: “I want to apologise to all of the Indigenous customers affected by this. I am deeply and personally disappointed that we have let you down. We should have listened more carefully. We should have been more attuned to what was happening. We should have picked this up earlier.

Summary thoughts

It’s very disappointing to hear how Telstra has treated some of its most vulnerable customers. The size of this fine will hopefully make Telstra ensure that nothing like this ever happens again.

Telstra has a big responsibility as one of the biggest and most important companies in Australia. $50 million is a sizeable portion of the net profit that Telstra is going to generate this year.

There are other ASX dividend shares that could be better prospects for long term returns than Telstra.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
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