Monday, April 22, 2024

Unwanted wire maintenance sparks multi-million dollar refund

Spark New Zealand has been warned by the Commerce Commission and has refunded close to 113,000 customers after charging for unwanted wire maintenance service, the Commission has announced. 

The Commission began investigating Spark New Zealand Trading Limited (Spark) in 2020 following a consumer complaint.

In a statement, the Commission said Spark had committed to refunding all affected customers. The company has already refunded around $15 million to customers with a remaining $348,757.93 still to be refunded to 4,921 customers. 

Between 2014 and early 2021, Spark charged more than 400 wireless broadband customers and around 112,600 fibre connection customers for the wire maintenance service, even though most would have no need for it. Spark collected around $15.7 million in fees for the service from those customers over the six-year period. 

Commission Chair, Anna Rawlings, says Spark’s conduct, which likely breached the Fair Trading Act, created an impression through its website that a wire maintenance service was suitable for all connection types when it was not, and made misleading representations through invoicing its customers for the service that would be of no use or benefit. This highlights the need for businesses to have the right systems and processes in place, so customers are charged only for the services they need, can use, or benefit from, she said.

“Customers must be able to rely on information businesses provide to them when they are buying, contracting or being invoiced for services,” says Ms Rawlings.

For many years, customers were automatically charged $4.95 per month for the wire maintenance service, unless they chose to opt out of it. In November 2018, Spark changed the service to an opt-in service following a wider discussion with the Commission on various compliance issues. 

As new technology was rolled out, Spark continued to offer and supply the service including to fibre and wireless broadband connection customers who might have no need, no use, or receive no benefit from it. Spark did not have processes in place to identify and record the details of customers who might need, receive benefit from or have use for the wire maintenance service, the Commission found.

“Businesses should not be charging customers for services that they don’t need or have no use for, or services that they cannot practically benefit from. If extra services or costs are charged, businesses must ensure that information about them is clearly disclosed to customers and is accurate, complete and easy to understand,” said Ms Rawlings.

Spark has since stopped selling the service to wireless and fibre connection customers.

Spark Product Director, Tessa Tierney says the wire maintenance service was originally put in place for copper customers, but in more recent years was also available to fibre customers.

“While some of these customers did benefit from the service, it was not applicable for the majority. So, in 2020 we stopped offering wire maintenance on fibre connections and proactively removed the service on current fibre connections,” she said.

“We’ve since refunded all eligible existing Spark customers and have been working hard to contact eligible former customers advising them of their available refund to claim. To date approximately 95% of eligible former customers have claimed their refund. 

“We also identified a small number of wireless broadband customers who were charged for the wire maintenance service as a result of separate historical system errors. We have communicated to, and processed refunds for, all wireless customers who were charged in error. 

“We recognise this falls short of the high standards of product management our fibre and wireless customers both expect and deserve, and we apologise to anyone impacted. We are committed to improving our systems and processes to ensure this does not happen again,” said Ms Tierney. 

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