The Telco debt trap is spiralling due to high-pressure sales tactics, poor credit checking, failure to adequately disclose the full price and playing to a consumer’s need for greed, lust and envy of a new smartphone.
The Telecommunications Ombudsman report Systemic Insight: Sales Practices Driving Consumer Debt found that common telco debt trap sales practices for post-paid plan phones led to 7,411 complaints for the six months ended 30 June 2018. The report is a good read.
The report shows that some Telcos fail to assess a customer’s ability to pay, sales staff focus on achieving sales more than whether a product is suitable for consumers or selling consumers multiple devices without checking they can afford the additional costs. These practices increase the consumer’s risk of financial difficulty.
The Telecommunications Industry Ombudsman states,
“Consumers can now use their telco plan to pay off accessories such as drones, headphones, and smartwatches. If a consumer went to a bank and asked for a $3000 loan, the bank checks the consumer’s capacity to repay that loan. Our recommendations in this report call on providers to consider how they can improve selling and credit assessment practices to ensure fair outcomes for their customers.”
In short, its time to replace the Telcos greed with a real assessment of the consumers need.
How do you get off the Telco debt trap?
First a very old anecdote. My parents always taught me that the only thing you borrow money for is a home mortgage – in my day only the banks provided that. If you needed something, you saved for it.
Imagine my horror when a naive young secretary recounted her experiences as she was facing eviction from her home. In short, she went to Walton’s (70s department store) and bought everything on a payment plan. “It’s only a dollar a month for a toaster.” But it was many more dollars a month for the TV, lounge and dining suite, washing machine, iron, hairdryer etc. Easy credit had meant she was well overcommitted and facing strong-arm debt collection.
Sorry to proselytise – if you don’t have the money either do without, do with less or save up. Today’s version of Walton’s is AfterPay and ZipMoney/Pay, and both suffer the same ethical dilemma.
Your choice, in the telco debt trap realm, is simple.
Buy a low-cost phone outright and buy a pre-paid monthly voice/data plan and control your costs.
GadgetGuy spoke to JB Hi-Fi. They have the Nokia 3310 3G feature (not smart) phone for $89 and the Nokia 8810 4G Yellow Banana phone for $129. Smartphones start from $128 for LG’s K8, and they have five more up to $199.
But they were a little more realistic, “If you are shopping in the <$100 range, you likely cannot afford to outlay the cash, but pre-paid SIMs are the way to go to control spending.
Telstra (a Telco) has an Alcatel Essential Plus (1C), 1X and Superior (Alcatel white label) for $99/129/199. These are great 18:9 screen modern handsets and account are the reason that Alcatel is #3 in Australian market share.
Boost Mobile (a Telstra retail partner) has the Alcatel U3 3G and the Alcatel Reo 4G for $59/89 and monthly pre-paid from $20 for 5GB.
GadgetGuy’s take – a phone and voice/data are almost inalienable rights
If you have $100, then buy Alcatel 3G 1C and find the cheapest SIM only voice pre-paid you can. The Alcatel 1C got GadgetGuy’s 5-out-of-5 recommendation for an excellent fit for purpose smartphone.
If not it is time to scour the second-hand shops and buy the cheapest handset you can afford but remember that battery life will be an issue as they do wear out.
Then rip into Coles, Woolies, Aldi or Boost to get a pre-paid SIM. escape the Telco debt trap.