The Australian Communications and Media Authority has found that Vaya Pty Ltd and Live Connected Pty Ltd, two related service providers, did not comply with the Telecommunications Consumer Protections Code (TCP Code) by requiring $20 security deposits from all their customers.
In February 2015, Vaya and Live Connected told customers that a security deposit would be debited along with their next monthly bill. They claimed it was necessary because some customers were using the service but not paying for it.
Under the TCP Code however, providers can only request a security deposit from a consumer following a credit assessment for the telecommunications product to be acquired by the consumer. In this case, neither Vaya nor Live Connected had undertaken individual credit assessments of the affected consumers.
‘This finding sends an important message to the telco industry that security deposits cannot be unilaterally imposed on all customers,’ said ACMA Chairman, Chris Chapman.
Security deposits are different from other payments or pre-payments that may be requested of customers by suppliers when they first set up an account. The TCP Code defines them as a payment made by a customer to a supplier to mitigate a credit risk.
Indeed, many telcos offer services that involve these sorts of ‘pre-payment’ arrangements. However, the TCP Code is prescriptive about the imposition of a security deposit and the information that must be provided to consumers about the terms of that deposit.
Vaya and Live Connected have agreed that in future they will not require a security deposit unless an individual credit assessment has first been undertaken.
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Media release 64/2015 - 9 December
The TCP Code
The TCP Code was registered on 1 September 2012, and included a number of new obligations on telco providers to give greater protections to customers from confusing mobile plans, bill shock and poor complaint handling practices. A refreshed TCP Code was registered on 3 December 2015.
The TCP Code delivered on the key recommendations of the ACMA’s Reconnecting the Customer report which proposed changes to make buying and using a mobile phone, or internet service, much simpler. Amongst these changes was the inclusion of spend management tools and alerts, which have had a positive impact for many consumers.
Clause 6.2 of the TCP Code requires suppliers to undertake a credit assessment before providing a post-paid service to a consumer, and for suppliers to explain the financial implications of providing that post-paid service.
Clause 6.4 of the TCP Code states that in the event a security deposit is required by a supplier, the supplier must provide the consumer with information about the terms of that deposit.
The remaining elements in clause 6.4.1 outline the actions suppliers must take regarding the security deposit, including that suppliers must obtain prior agreement about the circumstances in which it will be forfeited, advise customers how it is to be accessed and what arrangements are available regarding repayment.
These provisions ensure a security deposit is imposed only when certain requirements are met, and is treated differently from other payments (or pre-payments) that suppliers may require of their customers.
In February 2015, the ACMA received complaints from customers of Vaya and Live Connected regarding the imposition of a security deposit by the suppliers. On 4 February 2015, Vaya and Live Connected contacted all their customers by email and advised that they were imposing a ‘once-off refundable Security Deposit of $20 per mobile service’ to be debited along with the customer’s next monthly bill payment. Customers received an invoice a few days later including the security deposit amount.
The investigations found that the suppliers took into consideration a number of factors before making the decision to unilaterally impose a security deposit on all their customers, but that neither supplier based the requirement for a security deposit in accordance with the TCP Code requirement.