Credit management issues are becoming more prevalent in the complaints heard by the TIO, due to poor consumer information as well as social disadvantage.
Janet sticks with a magnet the one piece of paper nobody wants on their fridge – in amongst her youngest child’s artwork, a red-tinged paper with an ominous “Notice of disconnection”.
A couple of months before, she was told by her internet service provider that she had downloaded significantly more than her internet plan allowed her to and all that data incurred additional charges. Her teenage son had been downloading episodes of his favourite Japanese animation.
Janet’s situation is too familiar to TIO officers who deal with an increasing number of financial hardship complaints.
Why is credit management such a big issue?
With the growth and diversity of telecommunications products and services on the market, the TIO has observed a growth in disputes about excess internet usage charges, either on mobile phone or internet bills.
A telecommunications provider should make available to their customers tools to assist in managing their spending and monitoring their usage. These tools, along with the less popular debt collection or disconnection notices, are often referred to as “credit management”.
Credit management has long been a concern in telecommunications, ranging from disputes in high landline bills due to unmonitored international and STD calls to more recent trends of excess data usage fees on smartphones.
Contrary to some views, credit management issues arise not because consumers are cavalier or do not try to manage the cost of their services. Debt will often occur inadvertently or by a poor match between a consumer and their service.
The TIO’s data suggests that a particular problem is a lack of information: consumers do not appear to be sufficiently informed on how to monitor their usage, aren’t aware of how they may be charged for accessing the internet or calling certain numbers, or are confused by unclear advertising and contract terms.
Technological literacy also plays a part – consumers are often not told how the type of content they download translates to megabytes.
In other cases, deficient sales advice leads consumers to choose inappropriate plans. This generally means they find themselves in a position where their bills are higher than what they can afford to pay.
Vulnerable and disadvantaged consumers
The most disadvantaged members of our community are the worst affected. A language barrier or a disability that is not considered by a salesperson can have tremendous effects on a vulnerable customer.
For people at an economical disadvantage such as those on a low income, a telecommunications debt may be one of a number of service-related debts. Financial counsellors are concerned about the prevalence of serious telecommunications debts amongst the clients they see. Wayne Warburton, a TIO Councillor, psychology researcher and financial counsellor with Wesley Mission in Sydney says “a vast majority of our customers, apart from owing money on a credit card or finance companies, nearly all have telco debts which are a problem.”
If a customer has not paid a bill 60 within days of the due date, a telecommunications provider may report them to a credit reporting agency. This agency will list the customer’s name for up to five years, even if they pay the account within that period. This can affect a consumer’s eligibility to future forms of credit.
The TIO regularly receives complaints from consumers who are not told why or when they are being default listed. Others can sometimes be default listed before their account is 60 days overdue or on occasions a long time after their account became overdue.
What to do
The TIO handles complaints related to credit management taking into account good industry practice, the Australian Consumer Law, as well as the individual circumstances of a complaint.
We expect the consumer to continue to pay any undisputed amounts on their bill. At the same time, the provider should:
- suspend credit management and not commence legal action on any disputed charges while the matter is investigated by the TIO
- actively discuss and organise a reasonable payment arrangement at a consumer’s request if he or she is under financial hardship
- have regard to the vulnerability of the consumer.