ACCC news: Excite Mobile guilty of “unconscionable” acts; ByteCard first to feel wrath of unfair contract laws

SA-based mobile operator Excite Mobile was last week found guilty of engaging in “false and misleading and unconscionable conduct” by the Federal Court, after the ACCC took action against the company in late 2011.

The court also found that the company “acted unconscionably and used undue coercion” when trying to obtain payment for its services.

The court’s list of Excite’s misdeeds is lengthy and often bizarre. It involves Excite’s directors Obie Brown and David Samuel, and Fiona Smart, an agent of Excite.

Chief among the court’s findings are that Brown and Samuel created a fictional complaints handling agency called Telecommunications Industry Complaints, deceiving customers into thinking their complaints about Excite were being handled by an independent organisation.

The court also found that Excite misled customers when it sent letters to at least 1074 of its customers, claiming they were sent from fictional independent debt collector Jerry Hastings or his representative, who had been tasked with collecting an alleged debt owed to Excite.

The phone number on the letters instead went straight to Brown and Smart, who claimed to be from Hastings’ office, and tried to convince customers to pay the alleged debt.

The court considered the letters and the use of the Jerry Hastings phone number as undue coercion.

In a number of the letters, Excite falsely stated that to recover the alleged debt, a court would order repossession of all assets of value owned by the customer, including children’s toys, and would require the customer to pay a charge equalling 20% of the alleged debt for failing to pay on time.

The court described this transgression as unconscionable.

The full list of the court’s findings continues, and is available on the ACCC’s website.

“This is a landmark decision on unconscionable conduct,” ACCC chairman Rod Sims said.

“It also confirms the ACCC belief that the telecommunications sector must improve their standards in relation to the proper disclosure and clarity of key terms and conditions to consumers.

“The conduct of Excite Mobile was outrageous. Inventing a fictitious complaints handling body to deceive customers and creating a fictitious debt collector to coerce the customer to pay an alleged debt to Excite Mobile is unjustifiable and unacceptable,” Sims said.

The ACCC will now seek injunctions, pecuniary penalties, and that Brown and Samuel be disqualified for managing a corporation for five years.

ACCC tests unfair contract laws on ByteCard

The ACCC is putting the new unfair contract terms provisions of the Australian Consumer Law (ACL) to the test, launching legal action against ISP ByteCard last week.

ByteCard has also operated as Netspeed Internet Communications and Leading Edge Internet.

The consumer commission alleges that several clauses in ByteCard’s standard form consumer contracts are unfair and should be declared void.

This legal action marks the first time that the ACCC has commenced legal proceedings based exclusively on the new unfair contract terms provisions of the ACL.

According to the ACCC, the alleged unfair terms:

• enable ByteCard to change the price of an existing contract without allowing the customer to cancel it;
• require the customer to indemnify ByteCard “in any circumstance”, even when the contract has not been breached, and the liability, loss or damage may have been caused by ByteCard breaching the contract; and
• allow ByteCard to terminate the contract at any time, without cause or reason.

Under national unfair contract terms laws that came into effect in July 2010, a court may determine that a term of a standard form consumer contract is unfair and therefore void.

Earlier this year, the Federal Court fined ByteCard $75,000 for failing to refund or waive the debt of customers who had complained to the Telecommunications Industry Ombudsman (TIO) between 2006 and 2011.

At the same time, the court fined ByteCard director Brian Morris $37,500 for failing to comply with the TIO scheme.