Telstra forks out $24m as its history of wrongful billing finally bites

Wrongfully charging customers for inactive internet services over more than a decade has cost Australian telco giant Telstra (ASX: TLS) $24 million, comprising refunds of more than $21 million and a penalty of $3 million.

The action was a case of third time unlucky for Telstra which has fallen foul of the Australian Communications and Media Authority (ACMA) several times in recent years and ultimately tested the authority’s patience.

The $24 million payout follows an investigation by the ACMA which found that 6,532 customers, most of them small businesses, were incorrectly billed by Telstra an average of around $2,600 between April 2012 and August 2023.

ACMA says Telstra’s actions breached customer billing accuracy rules under the Telecommunications Consumer Protections (TCP) Code, as well as breaching a formal ACMA direction to comply with the code given to the company in 2020.

Telstra has been issued a $3.01 million penalty by ACMA while the company says it has issued refunds to the customers affected after self-reporting the issue to ACMA. Telstra has already refunded a total of $17.7 million and is expected to issue the remaining $3.4 million owed to customers by the end of this year.

The latest action comes on the heels of ACMA directing Telstra in September 2020 to comply with billing accuracy rules after it overcharged more than 10,000 customers almost $2.5 million over a 12-year period from 2008 to 2020.

ACMA found that Telstra overcharged more than 10,000 customers almost $2.5 million over the period, while another investigation in 2022 found Telstra overcharged more than 11,000 customers around $1.7 million.

ACMA chair Nerida O’Loughlin says the enforcement action was triggered after the authority ‘lost patience with Telstra after this series of significant billing errors’.

“Telstra has a history of incorrectly billing customers and it’s just not good enough,” O’Loughlin says.

“At a time when many small businesses are facing economic pressures, unaccounted costs can create very real stress and financial hardship.

"All telcos must have robust billing systems in place to ensure that consumers, including small businesses, are only paying for agreed and active services.”

Telstra told ACMA the billing issues were caused by the company failing to follow a series of steps in its ADSL internet service deactivation process.

“Telstra is a major player in the Australian telco sector and it needs to continue to prioritise its billing compliance and get its systems in order,” O’Loughlin says.

In a statement released by Telstra, the company's global business services group executive Dean Salter concedes the company has let its customers down.

"Getting something as important as billing wrong isn’t acceptable, and this is clearly not the experience we want to be providing our customers," Salter says.

"These ADSL billing errors occurred because we didn’t follow the proper deactivation process, including when some customers migrated to the NBN, which resulted in some customers being charged for inactive services.

"We’ve reached out to our customers to explain what went wrong and what we’re doing to fix it, including refunding them for the incorrect charges with interest.

"We know our customers deserve better, which is why we reported the issue to ACMA and conducted our own extensive investigation. We have put new controls in place to prevent this issue from happening again, including monthly checks if ADSL services are being used by customers before they’re billed."

Telstra has also agreed to report to the ACMA in six months about the effectiveness of these controls.

ACMA has warned that if Telstra continues failing to comply with its obligations on billing accuracy, it may take further action, including a filing with the Federal Court.