The Australian Competition and Consumer Commission announced on Tuesday that it had instituted proceedings against TPG, alleging that customers signing up to a TPG plan had to pay $20 for what TPG describes as a “pre-payment” to cover costs that might be incurred, but are not included in their plan, such as overseas phone calls.

The ACCC alleges that from March 2013, TPG represented on its website that the pre-payment could be used for excluded telecommunications services before the consumer cancelled their plan.

However, the pre-payment operates as a non-refundable fee and TPG retains at least $10 when a customer cancels their plan, the ACCC says.

“A reasonable consumer would expect that this $20 payment would be refunded if it was not used, but in fact it is non-refundable. It is unacceptable that TPG only disclose this forfeiture in fine print,” ACCC deputy chair Delia Rickard said.

Rickard says that, in addition, TPG’s terms mean that when a customer’s prepaid balance falls to $10 or lower, TPG automatically "tops-up" the pre-payment by a direct debit from the customer to return their prepayment balance to $20 – meaning that customers can’t use at least $10 of the pre-payment for telecommunications services when they cancel their plan, which is not disclosed.

“Since March 2013, the ACCC estimates that TPG is likely to have retained millions of dollars paid by consumers in pre-payments that were forfeited,” Rickard said.

The ACCC alleges that TPG’s representations to customers about the forfeiture and automatic "top-up" function are misleading, and also alleges TPG’s standard contract term requiring forfeiture of the pre-payment is unfair under Australian Consumer Law.

“We have, and will continue to, take action to hold telcos to account for failing to comply with the Australian Consumer Law," Rickard added.

The ACCC is seeking penalties and compensation for consumers.

Examples of the pre-payment in practice provided by the ACCC are:

Example 1

A customer makes an international call which costs $12 and international calls are not included in their plan. TPG deducts $12 from the $20 pre-payment, which means the pre-payment falls below $10. This triggers a top-up of a debit of $12 from the customer to take the pre-payment balance back to $20.

The customer does not use any further telecommunication services that are not included in their plan. The customer forfeits $20 when they cancel their plan.

Example 2

A customer never uses any telecommunication services that are not included in their plan. The customer forfeits $20 when they cancel their plan.

Example 3

A customer makes a call to a 1300 number which costs $8 and calls to 1300 numbers are not included in their plan. TPG deducts $8 from the $20 pre-payment.

The prepayment balance then sits at $12.

The customer then cancels their plan. The customer forfeits $12 when they cancel their plan.