12 Apr 2019

Spark fined $675k after failure to stop bills, 7000 customers still owed

3:42 pm on 12 April 2019

Telecommunications company Spark has been fined $675,000 for errors in invoices which saw customers overcharged a total of $6.6 million.

Spark New Zealand

Photo: RNZ / Kim Baker Wilson

Spark had earlier pleaded guilty to nine charges laid by the Commerce Commission under the Fair Trading Act. The company was sentenced in the Auckland District Court today.

Eight of the charges related to making false or misleading representations in its customer invoicing between June 2014 and December 2017.

Spark's terms and conditions said charges would stop 30 days after customers gave notice to terminate their contracts. However, final bills sent to nearly 72,000 customers included charges for services beyond the 30-day termination period, the Commerce Commission said.

"Customers rely on companies to invoice them accurately. Overcharging even a small amount to individual customers can result in businesses receiving large sums of money that they are not entitled to. In this instance customers overpaid $6.6 million, averaging an overcharge of $90 per person," Commissioner Anna Rawlings said.

"Spark failed to take necessary steps to ensure its invoices were accurate. More than 7000 customers still remain out of pocket despite refunds being made to a large number of others who were affected."

The other charge related to promotional letters sent to prospective Spark customers, offering a $100 account credit if they joined Spark and subscribed to a particular broadband plan.

The letters gave the impression that new customers could sign up online to receive the credit, when they could not. In fact, the credit would only be paid if customers telephoned Spark to sign up for the plan.

"It is vital that businesses clearly disclose the terms of any offers made when marketing their products," Ms Rawlings said.

Handing down the fine, Judge Russell Collins said commercial offending must be met with commercial penalties.

The Commerce Commission has also issued Spark with a warning relating to its failure to apply a $300 welcome credit to the accounts of eligible customers.

Affected customers were issued with invoices seeking payment for services where payment was not due because Spark ought to have applied the promised credit to the customers' accounts.

Spark identified and self-reported the welcome credit issue to the Commission, and subsequently identified all affected customers and correctly applied the credit to their accounts.

"This is another example of the care businesses must take to ensure their billing and invoicing systems are accurate and that customers are not left out of pocket. We encourage all businesses to regularly review their systems and processes to ensure that their products and promotional offers are being delivered to their customers as intended," Ms Rawlings said.

In the Commission's view Spark's conduct is likely to have breached the Fair Trading Act. A warning explains the Commission's view of Spark's conduct in this case and does not constitute a finding of non-compliance with the Fair Trading Act. Only the Courts can decide whether a breach of the law has occurred.

Spark said it has fully co-operated with the Commerce Commission during this process, which resulted from mistakes with no malicious intent.

Spark said it sincerely regrets the impact on customers and has taken all practicable steps to refund those customers who were billed incorrectly or did not receive their welcome credit.

The Court has taken Spark's conduct, including its guilty plea, into account when determining the financial penalty.

Spark has fully refunded existing customers and the vast majority of former customers, and has sent a letter or email to the last known address of former customers with a credit balance of $1 or more.

Any former customer who thinks they may be eligible for a refund can apply at spark.co.nz/refund.

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