The Australian Competition and Consumer Commission (ACCC) is suing Optus alleging it engaged in unconscionable conduct when selling phone products to vulnerable customers.
Many were First Nations customers from remote and regional areas, as well as customers living with disabilities or in disadvantage.
The ACCC claims Optus sold goods and services to hundreds of consumers that they “often did not want or need”.
The telecommunications company is accused of then pursuing consumers for debts that resulted from those sales.
The consumer watchdog said many were vulnerable customers who were living with disability, diminished cognitive capacity or learning difficulties.
Some customers were allegedly sold products despite being unemployed or having limited financial literacy.
“This case concerns allegations of very serious conduct, as our case is that Optus sold goods to consumers experiencing vulnerability which they did not need, did not want and could not afford,” ACCC Chair Gina Cass-Gottlieb said.
Gina Cass-Gottlieb, chair of the Australian Competition and Consumer Commission (ABC News: John Gunn)
Ms Cass-Gottlieb also alleged the conduct continued after management became aware of the situation and “failed to implement fixes”.
She alleged Optus, "took steps to protect its own financial interests by clawing back commissions to sales staff but failed to remediate affected consumers".
Ms Cass-Gottlieb said the commission-based remuneration system used by Optus incentivised the bad sales behaviour.
“This conduct is unacceptable to the ACCC. It is unacceptable to the Australian community," she said.
"If we are successful before a court in getting judgement as to liability — we will seek a very significant penalty."
Optus interim CEO Michael Venter said some staff have had their positions terminated.
Optus interim CEO Michael Venter has apologised for the distress caused by the "inappropriate sales practices".
"We deeply regret that in these instances we failed to meet the customer service standards that our customers deserve and should expect," he said in a press release.
Mr Venter said the company was remediating affected customers by providing refunds, waiving debts, and allowing customers to keep devices.
He also said some Optus staff had their positions terminated.
"Over the last three years we have undertaken a major review of how we manage sales, especially to vulnerable customers, bringing in new sales systems that give us more oversight, as well as extra, compulsory training programs and enhancements to our IT systems, to help prevent misconduct in sales to vulnerable customers from happening," he said.
He said a new customer advocate position would also be introduced to work alongside financial counsellors to improve support for customers in need.
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The case against Optus includes 429 customers who were allegedly put under “undue pressure” to purchase a large number of products and accessories who were not informed if Optus coverage was even available in their area.
Debt collectors were then allegedly engaged by Optus to pursue people who could not pay.
Ms Cass-Gottlieb said the ACCC would seek redress for the consumers involved and as well as further penalties and costs. She said a compliance program would also be sought forcing Optus to apply proper procedures and systems across every store.
The ACCC alleges almost all staff at two Optus stores in Darwin engaged in inappropriate sales conduct which was encouraged by the store’s management.
The watchdog alleged the stores did not carry out coverage checks despite more than 360 of their customers living in remote locations with no Optus coverage.
An Optus store in Mount Isa is accused of similar conduct involving 42 consumers.
Other allegations made by the ACCC include manipulating credit checks and making false and misleading representations to customers that items were free when they were not.
At a press conference today, Ms Cass-Gottlieb said one case involved a woman with an intellectual disability who was encouraged to come to the store without her carer where she was sold multiple products and eventually went into debt.
“Many consumers suffered financial harm, incurring thousands of dollars of debt and non-financial harm, such as shame, fear, and emotional distress about the debts or being pursued by debt collectors,” Ms Cass-Gottlieb said.
“Thankfully many consumers were supported by financial counsellors, carers and other advocates who gave their time and effort to support consumers to eventually seek resolution of Optus’s conduct.”
Mount Isa resident Peter Roberts, 74, said about two years ago he was sold phone products that were of no use and wouldn't provide appropriate coverage despite the sales assistant assuring him it would.
Mr Roberts said he demanded a refund but the staff called police and had him removed from the store.
"I was angry but I wasn't abusive. The police were quite nice, they said there's nothing I can do other than contact the ombudsman," he said.
Mr Roberts said after complaining to the ombudsman he was eventually given a full refund.
The ACCC said it began its investigation after receiving a referral from the Telecommunications Industry Ombudsman.
The ACCC has previously prosecuted Telstra for similar conduct, fining the company $50 million for its mistreatment of more than 100 Indigenous customers between 2016 and 2018.
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