South Australian mobile phone provider Excite Mobile has been found guilty of false, misleading and unconscionable conduct by the Federal Court after the ACCC took action against the company for faking a debt collection agency, creating a fictional complaints body, and misrepresenting scope of mobile coverage.

The Federal Court ruled Excite acted unconscionably in getting customers onto a 24 month phone contract, and used “undue coercion” when sending fake debt collection letters to 1074 customers, according to a statement by the competition watchdog.

The phone number included on the fake debt collection letters was answered by Excite Mobile staff.

The ACCC said the company had falsely stated on the letters that a court would make the customers pay 20 percent of the debt for failing to pay on time, and would order the repossession of all valuable assets owned by the customer, including children’s toys, to force late-paying customers to hand over the owed amount.

Excite Mobile directors Obie Brown and David Samuel were also found to have created a fake complaints company, called “Telecommunications Industry Complaints”, to deceive customers into believing their complaints were being handled externally and independently.

Additionally, the company told customers mobile service was available at their premises when it wasn’t, including in indigenous communities.

The Federal Court upheld the ACCC's claim that Excite Mobile's “day cap” clause was unconscionable. The clause meant any customer making more than one two minute call per day would get charged excess fees over the monthly contract charge, which it did not disclose.

Excite Mobile also included a $75 cool off fee on its contracts as well as a $195 charge for returning a damaged phone.

“The conduct of Excite Mobile was outrageous. Inventing a fictitious complaints handling body to deceive customers and creating a fictitious debt collector to coerce the customer to pay an alleged debt to Excite Mobile is unjustifiable and unacceptable,” ACCC chairman Rod Sims said today.

The ACCC will further seek injunctions, penalties, costs, and a five-year disqualification for Brown and Samuel from operating a company.