Restricting or disconnecting a service for credit management reasons - in detail

Complaints we receive about restricting or disconnecting a service for credit management reasons include claims that a telco restricted, suspended or disconnected a service because of overdue charges:

without reasonable notice
while the consumer was disputing the restriction, suspension, or disconnection
while the restriction, suspension, or disconnection was under review.

In this position statement credit management means the process by which a telco:

helps its customers to manage their spend on telecommunications services
manages any credit risk to the telco, and
collects overdue charges from its customers and former customers.

Laws and codes of practice

The following laws and codes of practice are relevant to restricting or disconnecting a service for credit management reasons.

Our approach

When we deal with complaints about restricting or disconnecting a service for credit management reasons we consider the law, good industry practice, and fairness in all the circumstances.

The law

The Customer Service Guarantee Standard sets out performance standards for the supply of CSG services. Most residential and small business landline services are CSG services. Usually mobile and satellite services are not CSG services.

A telco is exempt from the performance standards in the Customer Service Guarantee Standard if it disconnected a CSG service because of overdue charges after giving the consumer 21 days written notice that:

the charges were overdue
the consumer could ask the telco to reconsider its decision to disconnect the service
the consumer could complain to the TIO if they were not satisfied with the telco’s response

and one of the following occurred:

the consumer did not pay the charges or contact the telco to ask for reconsideration of the disconnection within 21 days
the consumer did not contact the TIO within 7 days if the telco still intended to disconnect the service after reconsideration, or
the consumer contacted the TIO within 7 days of the telco’s response, and the TIO gave a direction that supported the telco’s decision to disconnect the service.

In some circumstances, a consumer can be asked and may agree to waive their rights under the Customer Service Guarantee Standard. If the consumer waives their rights the telco is exempt from the performance standards in the Customer Service Guarantee Standard.

Good industry practice

Rules in the Telecommunications Consumer Protections Code include:

At the time of, or before the issue of the first bill for a service, the telco must advise the consumer:

how much time they have to pay for the service
they have an obligation to pay by the due date
any processes the telco has for interim billing, following up overdue bills, and helping consumers who are having trouble paying their bills, including where to find the telco’s financial hardship policy
the effect of part payment of a bill
non-payment or repeated late payment may impact on their service.

A telco must have information available about its processes to help consumers who are having trouble paying their bills.

A telco must give the account holder of the service, or their authorised representative, written notice at least five business days before restricting, suspending, or disconnecting a service for credit management reasons.

The notice must include an indication of the earliest date the restriction, suspension, or disconnection could occur. The telco must:

make sure the primary method of notification used is a format reasonably acceptable to the consumer based on their usage history
make reasonable attempts to ascertain whether the consumer has understood any oral advice given
tell the consumer about:
- the telco’s financial hardship policy
- any impacts the restriction, suspension or disconnection may have on any other services provided by the telco
- any on-going or additional charges that will still apply.

Before disconnecting a service for credit management reasons, a telco must send a separate disconnection notice, telling the consumer after the disconnection:

the consumer’s service, product or telephone number may no longer be available
information about the consequences of non-payment, including that a default may be reported to a credit reporting body
the debt may be passed to a collection agency or debt buyer
legal action may be taken
how the consumer can access the telco’s financial hardship policy.

A telco can restrict, suspend, or disconnect a service without notice only if:

the account status presents an unacceptably high credit risk to the telco
the telco reasonably suspects fraud or attempted fraud, or
the consumer’s account has reached a nominated restriction point.

At the consumer’s request, the telco must review any decision to restrict, suspend or disconnect a service. If the consumer remains dissatisfied with the outcome of the review the telco must tell the consumer how they can make a complaint.

A telco should not impose a reconnection charge following suspension or disconnection if it resulted from the telco’s mistake.

TIO view

A telco must not restrict, suspend or disconnect a service because of overdue charges if any of the overdue charges are in dispute. This includes disputes that are being investigated by the telco, the TIO or a relevant recognised third party.

The TIO Terms of Reference state that we can make a temporary ruling about a telco’s credit management action while we are handling a complaint. The telco must comply with this temporary ruling. For example, we can make a temporary ruling telling the telco to reconnect a service, remove a default listing of the consumer or not pursue a debt.

A telco should not restrict, suspend or disconnect a service solely because the consumer has made a complaint. This includes complaints about any service, not just the service the telco plans to disconnect.

A telco should not restrict, suspend or disconnect a service when charges for another service are overdue unless the consumer previously agreed that this could happen, and it is a reasonable thing to do in the circumstances.

Dealing with a dispute

To assess a complaint about restricting, suspending, or disconnecting a service for credit management reasons, we may ask for information or documents from the consumer and telco. This may include:

copies of bills
receipts for payments made
restriction, suspension or disconnection notices
collections and contact notes.

Outcomes

When, in our view, a service should not remain restricted, suspended or disconnected, we expect the telco to reactivate the service and address any impact the restriction, suspension or disconnection had on the consumer. For a CSG service, when the telco did not meet a legislated performance standard, including compliance with the notice requirements prior to disconnection of the service, compensation under the Customer Service Guarantee Standard may be payable to the consumer.

Effective date: 1 January 2022

This page provides broad guidance on the law, good industry practice, and what the TIO may consider to be fair and reasonable in general circumstances. It is not a full statement of the law or good industry practice. The TIO considers each matter brought to it on its own particular merits.