Australia’s second largest telco has agreed to the refunds after self-reporting breaches to the corporate and financial services regulator, the Australian Securities and Investments Commission (ASIC), for failing to comply with consumer protection laws.
Optus has appointed an external firm to investigate the breaches and will write to about 500,000 customers who ASIC says may be affected.
According to ASIC, where overcharging has occurred, Optus will take steps to contact past customers and will compensate current customers by a direct credit to the customer's account, with compensation including interest.
ASIC deputy chairman Peter Kell says the regulator's concerns arose after Optus reported a breach detailing its failure to provide certain customers with a product disclosure statement and a financial services guide.
Kell said the breach affected customers who purchased mobile phone insurance in store or by telephone, and occurred over a number of years – and, as a result, many customers may not have been aware of certain key features and limitations of the insurance they purchased.
Following its initial inquiries, ASIC says Optus reported four further breaches where customers:
• Did not receive one month free insurance under a promotional offer they were entitled to;
• Were incorrectly charged a premium for insurance during a ‘rain-check’ period;
• Were not provided with the required information before purchasing an insurance policy over the telephone (e.g. information about excesses and cooling-off rights); and
• Were issued the wrong cover, with some customers receiving ‘Device Insurance’ cover instead of the more favourable and less expensive ‘Yes Cover’.
The ASIC chief welcomed the steps taken by Optus to compensate affected consumers.
“It is important that when a business is licensed by ASIC to sell financial products to retail consumers, it ensures that it does it consistently with the representations it has made to consumers, and in compliance with the financial services laws.
“Where consumers have suffered a detriment, it is important that remediation is undertaken, and that steps are taken to ensure that the business is operating in compliance with the relevant legal obligations.”
Kell said consumers who purchased mobile phone insurance from Optus and might be affected should call Optus on 1800 854 349.
The Australian Communications Action Network (ACCAN ) said it was encouraged by Optus' move.
The telecommunications consumer protection group said it had recently reviewed a number of mobile insurance products and found they are often “poor value, confusing and riddled with tricky exemptions”, and encouraged any consumer thinking about taking up mobile insurance to closely read the fine print in the product disclosure statement.
An ACCAN spokesman said insurance products are currently exempt from the Unfair Contract Term provisions under Australian Consumer Law.
“This means insurance products are allowed to have unfair terms, so long as they are disclosed in a product disclosure statement. ACCAN has called for this exemption to be removed in its submission to the Australian Consumer Law Review.”