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                                                                   DA 12-1572

                                                              October 2, 2012

                                             Enforcement Advisory No. 2012-08

                             PREPAID CALLING CARDS

      BUYERS BEWARE: Carefully Review Calling Card Advertisements Prior to
                                    Purchase

       Many Prepaid Calling Cards Have "Fine Print" and Undisclosed Fees

   On September 28, 2012, the Federal Communications Commission took its
   sixth enforcement action in just over a year against a provider of prepaid
   calling cards, and has now proposed $30 million in forfeitures for
   apparent deception in the marketing of these cards. 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. The FCC's investigations
   have 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
   www.fcc.gov/complaints. 

   Need More Information? To help consumers make informed purchasing
   decisions, the FCC has issued a Consumer Guide and a Tip Sheet. Please
   direct media inquiries to Neil Grace at 202-418-0506 or
   neil.grace@fcc.gov. 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
   fcc504@fcc.gov 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
   1-888-Tell-FCC (1-888-835-5322).

                                         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).

   NobelTel, LLC, Notice of Apparent Liability for Forfeiture, FCC 12-120
   (rel. Sept. 28, 2012). 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

   PUBLIC NOTICE

                                  Page 1 of 2

                            FCC ENFORCEMENT ADVISORY

                              ***Consumer Alert***

   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
       cards;

     * 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

                                                 Internet: http://www.fcc.gov

                                                          TTY: 1-888-835-5322