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May 8, 2012
Enforcement Advisory No. 2012-03
PREPAID CALLING CARDS
BUYERS BEWARE: Carefully Review Calling Card Advertisements Prior to
Many Prepaid Calling Cards Have "Fine Print" and Undisclosed Fees
Prepaid calling card schemes remain a trap for unsuspecting consumers, as
a study issued today by Consumer Reports confirms. Many prepaid calling
card providers target vulnerable low-income, minority, or immigrant
communities, falsely claiming that calling cards costing just a few
dollars will give the consumer hundreds, if not thousands, of minutes of
calls to family and friends across the globe. In the last nine months, the
Federal Communications Commission has taken aggressive enforcement action
against some of these prepaid calling card companies, proposing $25
million in monetary forfeitures for deceptive advertising. The FCC's
investigations found that due to undisclosed fees and "fine print"
consumers would get only a fraction of the advertised minutes.
Unfortunately, some carriers appear to be continuing these misleading
practices. This Advisory alerts prepaid calling card consumers and warns
carriers that the FCC will diligently pursue violators.
What is a prepaid calling card? Prepaid calling cards provide a specified
amount of calling time, paid for in advance when the card is bought. The
cards can be very convenient, generally allowing consumers to call family
and friends inside or outside of the United States from any phone. The
cards are typically sold in denominations of $2, $3, or $5 at newsstands
and in grocery and convenience stores, and are often advertised to
consumers using posters displayed in retail locations.
What statutory provision applies to the marketing of prepaid calling
cards? Section 201(b) of the Communications Act mandates that "[a]ll
charges, practices, classifications, and regulations for and in connection
with [interstate or foreign] communication service, shall be just and
reasonable...". Applying section 201(b) in its prepaid calling card cases,
the FCC found that the companies involved apparently deceptively
represented to calling card buyers that they could use hundreds if not
thousands of minutes to make calls to foreign countries when, in fact,
they could use only a fraction of those minutes because a variety of fees
and surcharges quickly depleted the cards. The FCC found that the
companies' disclosures about these fees contradicted the much more
prominent claims in the marketing materials as to how many calling minutes
were available on the cards. In addition, the companies' explanations of
the range of fees and other terms and conditions were apparently so vague
that it was difficult for a consumer to know, when purchasing the cards,
what fees would apply or how the fees would impact the number of calling
minutes actually received.
What should businesses do to ensure they are in compliance? Prepaid
calling card companies should review section 201(b) of the Communications
Act as well as recent proposed forfeitures as they relate to carriers'
advertising and marketing practices. Companies must provide sufficient and
accurate information about rates, fees, and the actual number of minutes
available with their cards, clearly and conspicuously disclosed at the
point of sale, to allow consumers to make an informed decision about the
products they are purchasing. Businesses should consult their legal
counsel on any questions pertaining to their particular operations. We
expect this Advisory will lead to greater compliance with the
Communications Act in the marketing of prepaid calling cards. At the same
time, however, we emphasize that section 201(b) provides important
consumer protections and that we will continue to strictly enforce it.
What happens if companies do not comply with the law? Failure to comply
with the Communications Act may subject a company to severe penalties
including, but not limited to, substantial monetary forfeitures.
What can consumers do if they encounter a problem with their prepaid
calling cards? Consumers should first contact their prepaid calling card
service provider. If consumers are unsatisfied with their service
provider's response, we encourage them to contact the FCC at
1-888-CALL-FCC (1-888-225-5322) or to file a complaint online at
Need More Information? To help consumers make informed purchasing
decisions, the FCC has issued a Consumer Guide and a Tip Sheet. For
additional information, contact Eric Bash of the Enforcement Bureau at
202-418-2057 or firstname.lastname@example.org. Please direct media inquiries to Neil
Grace at 202-418-0506 or email@example.com. For general information on
the FCC, you can contact the FCC at 1-888-CALL-FCC (1-888-225-5322) or
visit our website at www.fcc.gov.
To request materials in accessible formats for people with disabilities
(Braille, large print, electronic files, audio format), send an email to
firstname.lastname@example.org or call the Consumer & Governmental Affairs Bureau at
202-418-0530 (voice), 202-418-0432 (TTY). You may also contact the
Enforcement Bureau on its TTY line at 202-418-1148 for further information
about this Enforcement Advisory, or the FCC on its TTY line at
Issued by: Chief, Enforcement Bureau
47 U.S.C. S: 201(b). The FCC has found companies liable for unfair and
deceptive marketing as an "unjust and unreasonable practice" under section
201(b). See, e.g., NOS Communications, Inc., Notice of Apparent Liability
for Forfeiture, 16 FCC Rcd 8133 (2001); Business Discount Plan, Inc.,
Order of Forfeiture, 15 FCC Rcd 14461 (2000).
See also Locus Telecommunications, Inc., Notice of Apparent Liability for
Forfeiture, 26 FCC Rcd 12818 (2011); Lyca Tel, LLC, Notice of Apparent
Liability for Forfeiture, 26 FCC Rcd 12827 (2011); Simple Network, Inc.,
Notice of Apparent Liability for Forfeiture, 26 FCC Rcd 16669 (2011); STi
Telecom Inc., Notice of Apparent Liability for Forfeiture, 26 FCC Rcd
12808 (2011); Touch-Tel USA, LLC, 26 FCC Rcd 12836 (2011).
Page 2 of 2
Page 1 of 2
FCC ENFORCEMENT ADVISORY
What to do before purchasing a pre-paid calling card:
* Carefully read the instructions on how to use the card;
* Understand the rates for your particular phone card;
* Read the "fine print" to understand any fees, conditions, or
limitations on the card;
* Check to see if the advertised minutes apply only to a single call or
to multiple calls;
* Confirm the expiration date to avoid losing unused minutes;
* Make sure there is a toll-free customer service number provided with
or on the card; and
* Get referrals: ask your friends and family to recommend cards they
have used and liked.
Common complaints that suggest possible pre-paid calling card fraud:
* Access numbers and/or PINs that don't work;
* Service or access numbers that are always busy;
* Card issuers that go out of business, leaving people with useless
* Rates that are higher than advertised;
* Undisclosed "post-call," "per-call," or "maintenance" fees;
* Cards that charge you even when your call does not go through;
* Poor quality connections; and
* Cards that expire without the purchaser's knowledge.
Federal Communications Commission
445 12th St., S.W.
Washington, D.C. 20554
News Media Information 202 / 418-0500