In what could be the second-highest penalty imposed under Australian consumer law, the competition and consumer watchdog launched legal action against the telecommunications giant on Thursday.
Sales staff at five stores across the country signed up 108 Indigenous customers to post-paid mobile contracts between January 2016 and August 2018.
Many spoke English as a second or third language and had difficulties understanding contracts, the Australian Competition and Consumer Commission said.
Many of the customers were unemployed or relied on government benefits or pensions as their primary source of income.
"This case exposes extremely serious conduct which exploited social, language, literacy and cultural vulnerabilities of these Indigenous consumers," ACCC Chair Rod Sims said.
Each customer owed, on average, $7400.
One person ended up more than $19,000 in debt, one was concerned about going to jail if they missed payments and another had to access their superannuation savings to foot the bill.
"Even though Telstra became increasingly aware of elements of the improper practices by sales staff at Telstra licensed stores over time, it failed to act quickly enough to stop it," Mr Sims said.
These practices continued and caused further, serious and avoidable financial hardship to Indigenous consumers.
Telstra has admitted it breached Australian consumer law and that sales staff at the stores in the Northern Territory, South Australia and Western Australia had acted "unconscionably".
In some cases, sales staff didn't give a proper explanation of financial risks and lied that some products were free.
Staff also faked credit assessments to ensure customers would be eligible for the contracts, all of which were signed on the day they visited the stores.
Telstra has admitted staff used unfair selling tactics and took advantage of a substantially stronger bargaining position.
The company has agreed to the filing of consent orders and joint federal court submissions in support of penalties totalling $50 million.
The federal court will decide at a later date whether the penalty is appropriate.
Telstra has acknowledged it had no effective systems in place to detect or prevent the conduct.
"Australia's largest telecommunications provider ... has clearly failed to meet community expectations for appropriate business behaviour," Mr Sims said.
The company has taken steps to waive the debts, refund money paid and put in place steps to reduce the risk of similar conduct in the future.