TIO Annual Report 2005/06

Case Studies

Financial hardship

The complaint

The complainant, whose sole income was a disability support pension, began accessing psychic lines that were charged at premium rates. She had run up several high bills, but was usually able to pay them off by relying on her savings and an overdraft. Eventually she contacted her provider to request assistance with a bill of more than $5,000.

She asked for her landline service to be replaced by one that could receive only incoming calls. The provider refused, arguing that the complainant had a prepaid mobile service and could cancel her landline service altogether. The complainant then cancelled her landline service only to have it reconnected a week later. She then incurred more debt by dialling premium rate services. The complainant eventually asked to enter a payment arrangement to pay off the debt, but the provider refused and referred the matter to a debt collection agency.

TIO response

In investigating complaints of this nature the TIO will have regard to its position statements Unlimited Credit Premium Rates and Hardship and Payment Difficulties. In this case, it asked the provider what, once it had become aware that the complainant was incurring an unusual amount of debt, it had done to minimise or limit her access to credit or exposure to debt. It also asked the complainant what steps she took, including the use of call barring, to limit any overcommitment on her part.

The provider told the TIO that although the complainant was incurring a large amount of debt, it took no action as she had a reasonably good record of paying her bills. The complainant appeared to have taken no action to limit her exposure to large debts until she requested her service be limited to incoming calls.

The TIO formed a view that notwithstanding the complainant’s good payment history the provider should have taken action earlier to prevent her exposure to such a large amount of debt. She had experienced payment difficulties previously and it would have been reasonable for the provider to at least contact the complainant to ensure that she was aware of her options in terms of limiting her exposure to overcommitment. The TIO was also concerned that the provider rejected the complainant’s proposal for a payment arrangement without proposing an alternative. Ultimately, the TIO believed that the complainant was primarily responsible for becoming overcommitted.

The outcome

The TIO recommended that:

• a proportion of the debt (about $3,000) that was incurred after the provider should reasonably have become aware of the overcommitment be waived
• the complainant repay the remainder of the debt at $50 a fortnight
• the complainant be provided with a service that was limited to receiving incoming calls.

Both parties accepted the TIO’s recommendations.

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