Telecoms watchdog sheds light on dodgy debts, declares direct debit issues a ‘systemic problem’

The creation of bad debts, identity theft and problems related to payment facilities such as direct debit have become the main systemic problems in the annual report of the telecommunications industry ombudsmanas financial regulators again seem to be struggling to curb rogue industry practices.

The annual report on phone and internet problems found that overall service complaints fell 33.4% in the fiscal year ended June 30, 2022, in which residential consumers and small businesses filed 79,534 complaints.

The drop in complaints was not unexpected, as carriers and retail service providers opened up their channels to allow hybrid working during the pandemic, and many removed speed and download caps that are typically placed on plans for network stability and availability.

Supermarket chain Cheapskate Aldi and budget birdseed supplier Dodo have both been questioned over an increase in complaints – which appear to be factored in as part of their cost of doing business.

But the iceberg identified in the report is the creation and listing of fake bad debts sent to collections and listed with credit reference agencies, a long-term problem that needed to be addressed when the TIO banned the sale of bad debts. 20 years ago.

The practice was banned because telecom operators like Telstra slaughtered their financial figures by passing errors from the billing system to recovery companies, Telstra unloaded $580 million and nearly smothering debt collector Baycorp Advantage in the ensuing fallout.

In an anonymized case study cited in the report to illustrate the effect of systemic issues, a consumer discovered that a credit default had been mistakenly listed in his name, with the telecom operator accepting the error and committing to correct it.

Four years later, the default was still on the consumer’s file, putting him at risk of losing a mortgage and buying a home. (All names have been changed)

“We reconciled Farhad’s complaint as a matter of urgency as the settlement date was approaching and Farhad risked losing the property and his deposit,” the TIO wrote.

“During our conciliation, Brite Talk confirmed that Farhad was not responsible for the debt. Following Farhad’s complaint to the TIO, Brite Talk located lists of credit defaults from two different credit reporting agencies and had them removed. Farhad’s credit files were corrected just under a week before Farhad’s settlement.

The specific identification of credit scoring issues is a headache for financial and consumer protection regulators, as it indicates that operators and the credit industry have again lowered debt quality thresholds to reduce costs, consumers carrying the box.

The problem is serious and seems to persist.

In March 2020, the Australian Competition and Consumer Commission (ACCC) successfully sued the controversial collection agency Panthera in Federal Court for inadmissible conduct for serial harassment of identity theft victims who had contracted fraudulent debts in their name and whose credit rating had been ransacked.

Panther fined $500,000 after getting hold of the violations.

The TIO defines a systemic issue as “a problem that has, or is likely to have, an adverse effect on multiple consumers or a particular type of consumer.”

At the top of the “investigations into systemic issues” are “payment issues and issues with direct debit services.”

“Telecommunications fraud and privacy issues” are also cited, with the TIO saying “regulators acted on a systemic issue that we brought to their attention.”

This usually means legal action or lawsuits.

The mention of direct debit issues is also noteworthy as it suggests that consumers are complaining about money being taken from their accounts when they have tried to stop or cancel a service.

Known as “inertial billing”, this practice has had disastrous consequences in the past and was a key factor in the dismantling and collapse of OneTel, a challenger to Telstra which continued to create claims as customers were actually walking away.

If this scenario is allowed to develop again, it’s a very bad look for banks trying to shut down BPAY and given its tiny fraud rates.


READ MORE:

Revenue Agencies Face Rising Costs in Uncertain BPAY Future

Comments are closed.