TPG cleared of allegedly misleading customers over ‘prepayment’ fee

The Federal Court has thrown out a legal challenge by the consumer watchdog against TPG Telecom over alleged misleading conduct relating to a $20 'prepayment' fee paid to the telco by some of its customers. 

The court case was brought against TPG in the Federal Court of Australia in late 2018 by the Australian Competition and Consumer Commission (ACCC). 

The ACCC was seeking compensation for TPG Internet customers that had been caught up in allegedly misleading conduct stemming from alleged unfair prepayment consumer contract terms.

According to the ACCC, customers signing up to a TPG plan had to pay $20 for what TPG describes as a "prepayment" to cover costs that might be incurred but are not included in their plan, such as overseas phone calls. 

"From March 2013, TPG represented on its website that the prepayment of $20 could be used for excluded telecommunications services before the consumer cancelled their plan," the ACCC said in December last year. 

"However, the prepayment operates as a non-refundable fee and TPG retains at least $10 of the prepayment when a customer cancels their plan," the watchdog said.

According to the ACCC, when a customer's prepaid balance falls to $10 or lower, it is automatically topped-up by a direct debit to return customer's prepayment balance to $20.

This means that customers could not use at least $10 of the prepayment for telecommunications services when they cancel their plan, which is not disclosed, according to the ACCC.

"Since March 2013, the ACCC estimates that TPG is likely to have retained millions of dollars paid by consumers in prepayments that were forfeited," ACCC Deputy Chair Delia Rickard said at the time. 

Now, it appears that TPG has emerged relatively unscathed by the legal action, with the Court dismissing the case and ordering that the applicant, the ACCC, pay TPG's costs for the proceeding.

"It seems to me, for reasons which I will explain, that there are two fundamental difficulties with the ACCC's case about TPG's use of the word 'prepayment'," said Justice O'Callaghan, who presided over the case, in his judgement released on 11 October.

"First, it assumes that a reasonable and ordinary consumer will not read, from its beginning to its end, the clause in which the Forfeiture Term is found, which appears as part of a number of "Important Things You Need To Know". Secondly, it relies on a myopic approach to the definition of the word 'prepayment'," he said.