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Working towards a hardship framework in the telecommunications industry

12 December 2012

This is an extract of a presentation given by Ombusdman Simon Cohen at the Australian Communications Consumer Action Network conference in September 2012.

Over the last year, the TIO has looked to increase our impact in achieving better outcomes when consumers find themselves unable to afford a telephone or internet bill. Our decision to do something more in financial hardship followed what we were seeing in our complaints.

We had seen an increase in high debts especially for mobile services, complaints about suspensions and disconnections, credit default listings and providers pursuing disputed debts.

High bills and financial hardship are not new to consumers. The TIO’s first annual report in 1994 highlighted a complaint by a consumer who had a card issued by a telco which could be used with a PIN number to make calls from phones other than the consumer’s home phone. The card was used without the consumer’s permission to make international calls, and his monthly bill was $7,000. The customer complained that had he been warned of the mounting charges, he would have cancelled the card. At the time, the Ombudsman recommended providers place a limit on the amounts that could be charged to the cards, and provide alerts for irregular or large amounts.

Fast forward 18 years, and our February 2012 TIO Talks included a report of a small business owner who received an $8,000 global roaming bill. His complaint included that he had not been notified about the high charges, that his phone was disconnected and the debt pursued while it was still in dispute. In the same vein as my predecessors, I have called for stronger spend management tools to warn consumers of potential excess usage and high charges.

However, unexpected high debt is not the only cause of financial hardship. Poverty and financial hardship are very real in our community; more than one in 10 Australians live in poverty. Indigenous communities have even greater poverty, as do demographic groups such as unemployed people and seniors.

The most recent ABS Household Expenditure survey suggests a quarter of persons on social security payments could not pay telephone and other utility bills on time.

Many of our complaints are not about unexpected high bills, but about situations where small amounts can overwhelm consumers. Commonly, these consumers are on fixed welfare payments, with very limited flexibility to meet unexpected additional expenses which can result from a house move, a late payment fee, or an unexpected charge resulting from a service change. Common features of these cases are that the debt is not disputed, but the consumer is asked to agree to a payment arrangement that they tell the provider they cannot afford. Our last annual report showed that new complaints about failed attempts to reach payment arrangements increased 10 per cent to almost 3,500 new complaints.

We have recently facilitated a number of forums and workshops with service providers, financial counsellors, peak industry and consumer bodies, and regulators, to focus on the arrangements required for consumers in financial hardship.

What started with the modest aim of promoting a dialogue is developing into an opportunity to make sure service providers are as creative in managing financial hardship as they are in developing and marketing new technologies and products.

The last workshop, at the end of July, focused on defining a way forward, and canvassed some of the key issues that will need to be addressed if a leading financial hardship framework is to be put in place. These include having a flexible and inclusive definition of financial hardship. Recognising that financial hardship may be long term or permanent was also emphasised.

There was a general consensus that the objective of a financial hardship framework should be to keep consumers connected to a telecommunications service while assisting them to meet their financial obligations.

The work is at an early stage. We have signed on to facilitating a further workshop to continue work on the framework; the interest in making a success of this work is real and apparent. It is especially timely as participation in the Australian community is ever more reliant on access to telecommunications services.

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