An Australian telecommunications company that created a sham independent complaints hotline and sent letters pretending to be a fictitious debt collector has engaged in "false, misleading and unconscionable conduct," the Federal Court of Australia has found.
Excite Mobile's conduct affected "a large number of consumers" across the country, including an unknown amount of people in Western Australia, Queensland and the Northern Territory, according to the Australian Competition and Consumer Commission.
Excite's mobile phone plans, which used the Optus Network, were initially flagged by the Indigenous Consumer Assistance Network.
In December 2011, following an investigation by the ACCC, proceedings were launched against Excite Mobile in the Federal Court of Australia sitting in South Australia.
Federal Court Judge John Mansfield handed down his judgment on Thursday, making adverse findings against Excite Mobile for several forms of "unfair", "unconscionable" and "misleading" conduct.
The company and three individuals, including directors Obie Brown and David Samuel, were misleading about an internal complaints handling department they had created to limit customers filing complaints with the independent Telecommunications Industry Ombudsman, the court heard.
To this end, the company had established its own organisation called "Telecommunications Industry Complaints".
Judge Mansfield found there was nothing "sinister" about trying to address complaints internally, but the company had made representations that it's "TIC" was independent from Excite.
"The evidence indicated that some consumers were deliberately misled by being told that TIC was independent of Excite Mobile," he said.
Excite Mobile also created a fake independent debt collector called Jerry Hastings, who it used to write threatening letters to at least 1074 customers, Judge Mansfield found.
"Jerry Hastings as used by Excite Mobile is, I find, a fictitious character and one created to be seen as separate from Excite Mobile," Judge Mansfield said in his judgement.
"By creating and sending the Jerry Hastings letters, Excite Mobile engaged in conduct which was misleading, deceptive and likely to mislead and deceive."
As well as being misleading, the letters used "undue coercion" against customers and made false representations about the remedies available to them, Judge Mansfield found.
The remedies Excite claimed while pretending to be the debt collector included demands for 20 per cent of the customers' original debt for late payment and the repossession of all assets, including children's toys.
"The letters were not from a debt collector or a representative of a debt collector but were created and sent by Excite Mobile," Judge Hastings wrote in his judgment.
There were also problems with the contracts themselves, Judge Mansfield found.
The company had enforced a "day cap" clause, which in some cases meant a customer could only make a two-minute call each day before facing fees in excess of the $33 monthly contract charge, something not made clear to customers when they were sold the plans.
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