The telecommunications watchdog has issued a formal warning to Telstra Corporation Ltd (ASX: TLS) for inadequate identity checks during number porting requests.
For many years, Australians have been able to switch mobile providers but still retain their phone number by a process called "porting".
Unfortunately in the past, scammers had hijacked victims' numbers to port it to their own phone — then would use the assumed identity to steal money.
In early 2020, new rules were implemented that required telcos to rigorously check people's identities before granting porting requests.
"Historically it has been too easy to transfer phone numbers from one telco to another. All a scammer needed to hijack a mobile number and access personal information like bank details was a name, address and date of birth," said Australian Communications and Media Authority (ACMA) chair Nerida O'Loughlin.
"These new rules help prevent scammers from taking control of people's identities to commit serious financial crimes."
On average, mobile number porting identity theft victims lose more than $10,000. But the time and psychological cost is greater, with years of stress to regain control of their identity with finance providers and credit ratings agencies.
Telstra's identity sins
Despite the new rules, ACMA found that Telstra breached ID verification processes at least 52 times in mid-2020.
Its big rival Optus broke the rules on one occasion, and smaller player Medion Mobile dropped the ball on 53 instances.
All three companies copped a formal warning from ACMA this week.
"We are cracking down on telcos that don't follow the rules and leave customers vulnerable to identity theft," O'Loughlin said.
A Telstra spokesperson told The Motley Fool that the company is a "big supporter" of the new rules.
"Unfortunately when these rules first came into effect, we didn't have all our processes in place to implement some of the changes as quickly as we should have," said the spokesperson.
"That meant in a small number of cases we let customers down, and we apologise to anyone affected. Since then we have put these new processes in place and seen a dramatic reduction in fraudulent port-ins."
At the time of writing on Friday, the Telstra share price is trading 0.87% lower at $3.41.
According to ACMA, the 2020 reforms have seen the volume of ID theft drop "dramatically".
"Some telcos are finding that fraudulent porting has stopped completely, and others report a drop of more than 90 per cent," said O'Loughlin.
"It is important that telcos remain vigilant about protecting their customers through these verification processes."
Telstra blocked customers from porting their numbers
It seems Telstra just can't get a handle on number porting.
Earlier this month, the company paid an infringement penalty of more than $1.5 million. This was after an ACMA investigation that found the telco stopped number porting in late March 2020.
The result was that Telstra customers who wanted to leave for another provider couldn't do so without giving up their mobile number.
The telco blamed COVID-19 for the disruption that eventually impacted 42,000 services. It didn't resume porting operations until July, and didn't clear the backlog of requests until October.
"It is clear Telstra, for a sustained period, did not have sufficient plans in place to comply with an important consumer safeguard that promotes competition in the telco market," said O'Loughlin at the time.
"Australian consumers must have the freedom to change their telco provider to take up services that best suit their needs. This includes keeping your own phone number even if you take your business elsewhere."
