Press Release
OFTA Recommends Best Practice Benchmarks to Alleviate Mis-selling Problems

The Office of the Telecommunications Authority (OFTA) today (29 March 2005) released its first report on the mis-selling practices of fixed-line services to consumers in Hong Kong.

The report established nine best practice benchmarks to improve industry sales practices and help safeguard consumer interests (details of the nine benchmarks are at the Annex).

"Mis-selling of fixed-line services directly to consumers via door-to-door sales in residential estates or via street booths has become an area of growing community concern," an OFTA's spokesperson said.

Mis-selling, in broad terms, involves sales people misleading individual consumers into buying services in "one-on-one" sales situations.

"The best practice indicators, which aim to tackle the root of the mis-selling problems, were identified after undertaking a comprehensive review of industry practices and overseas experience. They have been drawn up through a consultative process involving industry participants and the Consumer Council," the spokesperson elaborated.

OFTA also announced the resolution of a number of mis-selling cases investigated under section 7M of the Telecommunications Ordinance prohibiting misleading or deceptive behaviour. Under the terms to resolve these cases, the four licensees involved will make a funding contribution of HK$2.3 million towards a consumer education and awareness programme.

The licensees also undertook to implement the nine best practices to improve their services and take remedial actions with the complainants.

"The adoption of the alternative dispute resolution approach in these cases reflects a common practice among many overseas regulators. It is a pragmatic and effective way of achieving the desired outcomes in protecting consumer interests."

"To be overseen by the Consumer Council and OFTA, the awareness programme will make use of the media, such as radio and television, to promote public awareness about how to be a smart consumer," the spokesperson added.

"OFTA has set clear standards against misleading and deceptive conducts. We resolve to penalise operators that fail to meet the required standards. Future cases will be assessed more rigorously than before and financial penalties when imposed in appropriate cases are likely to be higher than they have been in the past," the spokesperson stressed.

The mis-selling report and the case summaries of the section 7M investigations can be downloaded from OFTA's web site at www.ofta.gov.hk.

Office of the Telecommunications Authority
29 March 2005

Annex

Nine Best Practice Indicators Aimed at Tackling Mis-selling Problem:

1. Sales person selection – the process for selecting sales people should assess candidate suitability having regard to mis-selling risk, and in the case of sales agencies, service providers should be satisfied that the sales people to be used to represent them are suitable.

2. Sales person remuneration – there is anecdotal evidence that solely commission-based remuneration can raise the risk of mis-selling. Accordingly, this issue should be taken into account when designing an effective section 7M compliance strategy.

3. Claw-back and withholding of commissions – a number of service providers already utilise these contractual devices to manage mis-selling risk, and OFTA encourages action in this area to increase the accountability of sales staff and sales agencies.

4. Sales person training – proper training in relation to section 7M is a key strategy in addressing the mis-selling problem. Comprehensive induction programs and "on-the-job" supervision of new sales people are two measures that can increase training effectiveness.

5. Selling to the elderly – elderly people are a high-risk category of consumers in relation to mis-selling. Service providers should create specific policies and training initiatives to reflect the importance that should be placed on protecting elderly people against mis-selling practices.

6. "On-the-job" monitoring of sales people – while sales calls are usually undertaken by sales people working alone, service providers should encourage compliance with section 7M and resolve disputes more efficiently through increased "on-the-job" monitoring of sales conduct wherever feasible.

7. Sales documentation - sales documentation, including sales contracts and service application forms, should comply with the Code of Practice for the Service Contracts for the Provision of Public Telecommunications Services, as published by OFTA on 12 November 2004, and related guidelines such as OFTA's Section 7M Guidelines.

8. Quality control confirmation calls – confirming a consumer's agreement to purchase particular goods or services as per a written application is recognised best practice. Such calls should be rigorous and result in reliable confirmation, as well as giving consumers the opportunity to void or change their applications.

9. Recording conversations with consumers – service providers should record all conversations between their staff and consumers wherever possible in accordance with applicable laws. This will generate both monitoring (accountability) and verification benefits, and provide evidence to assist OFTA investigations into mis-selling allegations.