Company created fake debt collector

An Australian company that created a sham independent complaints hotline and sent letters pretending to be a fictitious debt collector has engaged in "false, misleading and unconscionable conduct," the Federal Court of Australia has found.

In December 2011, following an investigation by the ACCC, court proceedings were launched against Excite Mobile in the Federal Court of Australia. The Federal Court handed down his judgment on Thursday 18th April 2013, making findings against Excite Mobile for forms of "unfair", "unconscionable" and "misleading" conduct.

The company and three individuals, including directors Obie Brown and David Samuel, were misleading about an internal complaints handling department they had created to limit customers filing complaints with the independent Telecommunications Industry Ombudsman, the court heard. Excite Mobile also created a fake independent debt collector called Jerry Hastings, who it used to write threatening letters to at least 1074 customers, Judge Mansfield found.

"Jerry Hastings as used by Excite Mobile is, I find, a fictitious character and one created to be seen as separate from Excite Mobile," Judge Mansfield said in his judgment. "By creating and sending the Jerry Hastings letters, Excite Mobile engaged in conduct which was misleading, deceptive and likely to mislead and deceive."

As well as being misleading, the letters used "undue coercion" against customers and made false representations about the remedies available to them, Judge Mansfield found. "The letters were not from a debt collector or a representative of a debt collector but were created and sent by Excite Mobile," Judge Mansfield wrote in his judgment.

There were also problems with the contracts themselves, Judge Mansfield found. Judge Mansfield also found a $75 "cool-off" fee and a $195 charge for returning a phone if the box was damaged to be unconscionable or unfair.

ACCC chairman Rod Sims said the judgement was a "landmark" for unconscionable conduct.

Excite Mobile faces fines of up to $1.1M for each breach of trades legislation, an ACCC spokesman said.

The ACCC are seeking injunctions and pecuniary penalties, which would include orders Mr Brown and Mr Samuel be disqualified from managing a corporation for five years.