FTC Cracking Down On Misrepresented Prepaid Calling Cards

The FTC Fights Prepaid Calling Card Scam
The Federal Trade Commission, the nation's consumer protection agency, is going after shady prepaid calling card companies who misrepresent the value of their product to consumers. The FTC "works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them."

“In the fall of 2007, the FTC established a joint federal-state task force concerning deceptive marketing practices in the prepaid calling card industry. The task force members include representatives from the offices of more than 35 state attorneys general and other state and local agencies, and the Federal Communications Commission. Working cooperatively allows us to share information and facilitate law enforcement activity in the prepaid calling card area,” the FTC testified to the U.S. House Subcommittee on Commerce, Trade and Consumer Protection of the Committee on Energy and Commerce.

The FTC has filed lawsuits against two major prepaid calling card distributors for fraudulent business practices. The two companies failed to disclose hidden costs involved in using the cards, resulting in their customers getting fewer minutes than they thought they purchased and at a higher cost-per-minute than advertised by the calling card company. The FTC ran tests on the cards earlier this year before they filed suit against the two companies, and concluded that one card only provided 50% of the minutes that it advertised, while the other card provided less than 43% of the advertised minutes. Both companies targeted recent immigrants.

Pending legislation, the Prepaid Calling Card Consumer Protection Act will require prepaid calling card distributors to fully disclose all fees and other limitations associated with use of the card, and provide consumers with the dollar value of the card or the actual number of minutes the card provides.

Using a Prepaid Calling Card
Calling cards can be purchased at newsstands, convenience stores, grocery stores, and drug stores, as well as a number of other locations. They offer the convenience of being able to make long-distance phone calls from anywhere, including pay phones, hotel rooms, and residential lines that do not have long-distance service. Legitimate prepaid calling cards allow the user to budget for a preset spending limit on long-distance calls, and can come in handy for travellers or college students.

To use the card, you'll dial a toll-free access number, and enter a PIN to access your account. When prompted, you'll dial the number you wish to call. A computer lets you find out how many minutes you have remaining on your card. Some cards can be recharged over the phone or at a merchant with a credit card, and some cards must simply be replaced when the minutes are used up.

Prepaid Calling Card Rip-Offs
Fraudulently advertised prepaid calling cards short the user on the amount of minutes they actually get, and money is lost. Unsuspecting consumers may find that their card's minutes are used up long before they should be, or sometimes they find the card doesn't even work according to the provided instructions. Retailers of the card may not even back the cards they sell, and may tell the consumer to deal with the problem directly with the issuer of the card. The user may find they cannot contact anyone with the prepaid calling card company who can help with their troubles in using the card.

The FTC warns of some of the common complaints regarding misrepresented cards:

• cards that don't provide the number of minutes advertised
• cards that debit minutes even when the user did not get connected to the number they were calling
• cards that have hidden fees, taxes, and surcharges that increase the cost-per-minute
• bad connections
• access numbers and PINs that don't work
• customer service numbers that don't work or are constantly busy
• access numbers that always have a busy signal, preventing you from using the card
• card issuers who go out of business, leaving you with a useless card

Preventing Problems with Prepaid Calling Cards

• Ask the retailer if they back the cards they sell, and what you should do if the card doesn't provide the number of minutes it claims to give you.
• Check both the domestic and international rates on the card; if it doesn't provide that information, consider getting a different card.
• Look for disclosures about surcharges, maintenance fees, and additional fees for making calls from a pay phone, to a cell phone, or using a toll-free access number.
• Compare rates. Super-low international rates may be a warning signal that the card won't deliver the number of minutes that are advertised.
• Check to see if the card has an expiration date.
• Be sure you understand the usage instructions on the card.
• Ensure the card has a toll-free customer service number in case you have any problems.
• Make sure the PIN is not visible from the outside of the package - otherwise, anyone can use the minutes that you paid for.
• Consider testing out a company with a small denomination before buying a large amount of minutes on one card.

If Your Prepaid Calling Card Doesn't Work As Advertised
First, call the customer service number on the back of your card. If you are unable to contact anyone at the number the card provides, or if the company refuses to help, contact:

• the Federal Trade Commission at www.ftc.gov or 1-877-FTC-HELP
• Your local Consumer Affairs Department or your state Attorney General
• Your local Better Business Bureau to file a complaint, or to view customer service reports on the company.
  
  
  
  Source:
  The Federal Trade Commission