Oracle Blog

The TIO is receiving up to 20 complaints a week from small businesses who say they were misled about, or did not fully understand, the nature and operation of equipment leases bundled with telecommunication deals when they signed up to them.  “Small businesses are telling us they are being approached by a sales person who offers a contract for call costs at the same price or less than what they are currently paying. They also say they were offered a handset, plasma TV, laptop or even an overseas holiday at ‘no extra cost’,”

Deputy Ombudsman Simon Cleary said. “What small businesses sometimes don’t fully appreciate is that they are signing two separate contracts: one for the phone calls with a telecommunications service provider and the second being a lease of the equipment from a finance company." “The two contracts are inter-related, with monthly lease payments often being offset by ‘credits’ on the phone bill from the telecommunications service provider. The size of these credits is similar to the monthly lease payments for the finance contract and the sales person will often ask to see a past telephone account for the purpose of calculating the credits. “However, small businesses say that their call rates subsequently increase and the package proves to be more expensive than their previous arrangement. Importantly, if the business then transfers to another phone company, the small business will still be bound by the finance company lease but without receiving the credits. “And far from being free, the equipment can prove to be quite expensive if the business ends up paying just the finance lease. We have received complaints of standard model laptops leased over a five-year period costing up to $20,000 in lease payments.”

Mr Cleary said that while the dual contract arrangement might meet the needs of many businesses the TIO was concerned by the number of complaints from small businesses who said they had been misled and then found themselves locked into expensive equipment leases. The TIO can make binding rulings to direct service providers to release a small business or consumer from a telecommunications contract, but has no similar power over a finance company and their leases. Given the number of similar complaints received by the TIO, the TIO warns small businesses who might be offered equipment leases bundled with telecommunication deals to take extreme care before signing contracts. In particular, small businesses should ask:

Who are the parties involved in the deal? Are commissions paid as part of the deal, and to whom? How many contracts does the deal involve? Is it just one contract with one company or are they separate contracts? Exactly what services are being offered by the phone company? If “credits” are being offered to offset the lease payments, how much are the credits and are there any limitations on when they are paid? Is there a lease? If so, what are the monthly lease payments, and how long is the lease for? What happens if the telecommunications contract ends? Is the business still bound by the lease? What is the total cost of the deal over the term of the contracts? Does it actually work out to be cheaper than the small business’s existing telecommunications arrangements?

Oracle Telecom does not engage in phone plan or equipment contracts like those mentioned above. Oracle Telecom has a strict policy not to interact with service providers who conduct misleading plans.