Former South Australian-based mobile phone company Excite Mobile has been penalised more than $450,000 for constructing a fake debt collector to pressure customers for payment.
The company was fined a total of $455,000 for engaging in false, misleading and unconscionable conduct and for using undue coercion in relation to the selling and obtaining payment for mobile phone services.
The company’s directors, Obie Brown and David Samuel, were also ordered to pay penalties of $55,000 and $45,000 respectively, and a staff member involved was ordered to pay $3500.
The court found Excite Mobile guilty of a number of breaches of Australian Consumer law, including falsely representing to customers that coverage was available at their home address, creating a pretend independent complaints handling organisation and creating a fictional debt collector to chase up customers.
Excite Mobile sent letters to at least 1074 customers, falsely representing that the letters were from an independent debt collector called Jerry Hastings.
The letters included a telephone number for the fake debt collector and were supposedly signed by Hastings or one of his representatives.
If a customer called Hastings about the debt, the phone was answered by Excite Mobile employee Fiona Smart who then transferred the called to Brown who pretended to be from Hastings’ office.
Brown and Smart then attempted to induce the customer to pay the alleged debt to Excite Mobile.
Within the letters, the court found a number of false representations were made about the rights and remedies available to Excite Mobile should legal proceedings be commenced against the customer.
Excite Mobile alleged a court would make customers pay an extra 20% on top of the customer’s debt for not paying on time and it would repossess all valuable assets such as children’s toys.
Letters the Australian Competition and Consumer Commission filed with the court when the case commenced in 2011 included a number of threatening, poorly-written phrases.
“You know things like your stereo, tvs, cars, and games systems. Anything of value to you will become ours,” one letter said according to The Australian.
“Believe me there is no way you would want to meet my lawyer in court. While she seems like a nice lady she is a killer in front of the judge… she can make your life extremely uncomfortable.”
The letters went on to urge the customers to pay varying sums, as a “small price to pay to stop people coming into your house (and) ripping the TV out”.
Some customers affected included those living in indigenous communities in remote areas of Queensland, Western Australia and throughout the Northern Territory and Cape York Peninsula.
The court also found Excite Mobile’s “day cap” for customers unconscionable. The clause meant customers making more than one two-minute call a day would be charged excess fees.
ACCC chairman Rod Sims said earlier this year Excite Mobile’s conduct was “outrageous” and “unjustifiable”.
The court has also disqualified Brown and Samuel from managing a corporation for three years and two-and-a-half years respectively, while Brown, Samuel and Smart have all been ordered not to engage in similar conduct for seven years.
Hall and Wilcox partner Sally Scott told SmartCompany this case is significant because it shows the ACCC’s willingness to pursue not only companies, but also directors and employees.
“It is a reminder for individuals that they can face liability if their company has breached the Australian Consumer Law. Individuals can face liability either because they are primarily responsible for the contravention, or if they assist or are involved in the contravention,” she says.
“Individuals who are being asked to be involved in a company’s contravention of the Australian Consumer Law need to speak up and ensure they don’t take part, otherwise they too could be caught.”
Individuals can be fined up to $220,000 per offence and companies can be fined up to $1.1 million.
Scott says this isn’t the first time a company has been penalised for coercion and unconscionable conduct concerning debt collection.
“Businesses need to realise that they can’t lie, exaggerate or mislead in order to collect a debt, or indeed in relation to any other aspect of business,” she says.
“It is a fundamental principle of the Australian Consumer Law that you can’t mislead in business. Both companies and individuals need to remember this, or they could end up being penalised.”