Once again, after years of exposes and regulatory actions,
federal officials and leading consumer advocates are cautioning
purchasers to be wary of prepaid telephone calling cards. The
reason: Some calling card marketers are still duping consumers,
connecting them to not much more than long-distance deception and
The Federal Communications Commission on Wednesday issued a
special Enforcement Advisory, warning that "prepaid calling card
schemes remain a trap for unsuspecting consumers."
Among the many problems, particularly when it comes to some
international calling cards, which the commission called
- Access numbers or PINs that don't work or are perpetually
- Undisclosed post-call or per-call hang up fees, "maintenance"
fees and other largely hidden fees that can quickly dilute the
value of the card.
- Per-minute rates that are unclear or higher than
- Short-fuse expiration dates.
"Every day, millions of Americans -- many from our most
vulnerable minority and immigrant communities -- rely on prepaid
calling cards to stay in touch with family and friends around the
world," said P. Michele Ellison, chief of the FCC's enforcement
bureau. "Sadly, these consumers often don't get what they paid
She spotlighted one card that advertised hundreds of
international calling minutes. "But what the unsuspecting consumer
didn't know is that a caller could only get all of those minutes by
making a single, 13-hour call," Ellison said.
The federal alert, the latest in a series of "buyer beware"
warnings about international calling cards, was issued in
conjunction with release of a new calling-card study by Consumer
Reports. Funded by a grant from the settlement of a previous
multi-state investigation of phone-card companies, the study
involved more than 130 cards bought in about two dozen stores in
The bottom line: Consumer Reports found a veritable horror show
of apparent and potential abuses. "Generally, you get all the
minutes claimed for a card only when you use it for a single call,"
the report said. "Otherwise, the value of the cards can be eaten up
in fees and surcharges instead of actual time spent calling friends
Though some international calling cards, primarily those from
large, well-known firms, provide genuine value, especially for
immigrants with limited financial resources or communications
options, the industry is largely populated by smaller, little-known
companies that appear to have lower standards.
The study found these problems:
- Poor disclosure. Some 75 percent of the purchased cards did
not disclose per-minute calling rates -- the rate at which each
card's value would decline.
- An often impenetrable swamp of undisclosed or vaguely
disclosed fees. Post-call fees. Periodic fees. Uncompleted call
fees. Other surcharges. "Some cards were so crammed with fees and
disclaimers we had to use a magnifying glass to read them," the
study reported. "One card's disclaimer ran to more than 500
words." In some cases, weekly "maintenance" fees imposed after
the first call -- even if the call was just to the card's issuer
to determine calling rates -- ate up the card's entire balance
within three weeks. The report's conclusion: "Given the multitude
of murky fees and surcharges imposed by many of the cards, being
an informed buyer is nearly impossible."
- Sloppy and misleading sales practices. Some cards were
improperly activated at the store. The PIN numbers required by
some cards were printed on separate receipts, which, if lost,
rendered the cards unusable. Some cards had short expiration
dates, in several cases only 30 days from the date of activation.
One card's expiration date already had passed, though it worked
- A wide range of calling rates, even to the same country. Want
to call Mexico City? One card offers more than 20 hours for $5.
Another offers five minutes for $2.
- Questionable rounding practices. Most cards rounded call time
to the next minute, but some rounded up to the next five-minute
increment, substantially diminishing the value of those
- Here today, gone tomorrow. Some smaller companies suddenly
went out of business, leaving card purchasers holding the
These issues are not new. The FCC and other federal officials
have had the calling card industry in their sights for years.
In September 2008, witnesses told a U.S. Senate committee that
victims of these marketing scams have been easy pickings, because
of inconsistent state laws, the industry's low barrier of entry and
the relatively small dollar amounts taken from each victim.
In addition, in February 2011, Consumer Reports printed a
similar study, also suggesting widespread abuses.
"While the cards are popular, they also prompt many complaints
to government agencies and online forums," the publication said in
that report. "Searching the Web, we found customer peeves focused
on call quality, access numbers and personal identification numbers
(PINs) that don't work, undisclosed fees, higher-than-advertised
rates, charges for calls that never went through, and poor or
non-existent customer service."
A representative of a newly formed prepaid calling card trade
association told Consumer Reports that most elements of the
industry, which sells billions of dollars worth of cards every
year, were honorable and that most cards are used for a single
call, making them a good value.
Ellison, the FCC's enforcement director, said formation of the
trade group was a good sign, but -- when it comes to consumer
affairs -- the calling-card industry has a lot of work to do and
the commission "will remain vigilant in its pursuit of those who
seem to mislead and deceive consumers."
During the past nine months, the commission has taken
enforcement actions against at least four calling card companies,
accusing them of deceptive advertising -- particularly regarding
the true number of usable calling minutes -- and proposing $25
million in fines.
"The FCC is committed to strong, consistent enforcement action
in this area," Ellison said. "We have sent a clear message that
misleading consumers doesn't pay and won't be tolerated."