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FOR IMMEDIATE RELEASE: NEWS MEDIA CONTACT:
September 1, 2011 David Fiske (202) 418-0513
Email: david.fiske@fcc.gov
FCC ANNOUNCES $20 MILLION IN PROPOSED PENALTIES AGAINST COMPANIES BELIEVED
TO BE INVOLVED IN DECEPTIVE MARKETING OF
PREPAID CALLING CARDS
Customers from minority and low-income communities most affected; Millions
of dollars lost in alleged scams that allowed customers to use only a
fraction of minutes they purchased
(Washington, D.C.) - The Federal Communications Commission today proposed
forfeitures totaling $20 million from STi Telecom Inc. (formerly Epana
Networks, Inc.), Lyca Tel, LLC, Touch-Tel USA, LLC and Locus
Telecommunications, Inc. for apparently violating the Communications Act
by using deceptive marketing practices to sell prepaid calling cards,
scamming consumers out of millions of dollars, mostly from low-income and
minority communities. The FCC is proposing $5 million in forfeitures for
each company.
Under Commission precedent, unfair and deceptive marketing is an unjust
and unreasonable practice that violates section 201(b) of the
Communications Act. In today's cases, the Commission found that the
apparent violations were particularly egregious. Each of the companies
involved had made claims that, with a card costing only a few dollars,
buyers can make hundreds if not thousands of minutes of calls to foreign
countries - when in fact, because of the multiple fees and surcharges
assessed, they will be able to use only a fraction of those minutes.
Moreover, the Commission found that the companies apparently did not
clearly and conspicuously disclose the fees to consumers.
In one case, the FCC's investigation revealed that a consumer would have
to make a single 13-hour long call in order to receive the hundreds of
advertised minutes. If the consumer made more than one 13-hour call, then
the consumer would begin to receive smaller and smaller fractions of the
card value. In other cases, a card that purported to offer 1,000 minutes
was exhausted after a single 60 minute call. And another card that was
advertised for 400 minutes of talk time could be exhausted after a single
15 minute call. Over the past year, the companies named each marketed
thousands of such prepaid calling cards to unwitting consumers, many of
whom rely on prepaid calling cards to communicate with loved ones outside
the U.S. As a result, consumers already struggling in a difficult economy
were bilked out of millions of dollars.
FCC Enforcement Bureau Chief Michele Ellison said: "Every day, people -
many of them from our most vulnerable communities - rely on prepaid
calling cards to connect with friends and family around the world. The
orders released today detail the misleading practices -- from illegible
fine print to impossible-to-calculate fees - that some companies appear to
use to sell their cards. We hope that these cases lead all prepaid card
providers to reexamine their marketing practices to ensure that they are
treating consumers fairly."
Because these enforcement actions reveal apparent widespread patterns of
deceptive activity, the Commission today also released an Enforcement
Advisory on this topic to alert consumers to be careful when choosing
prepaid calling cards, and to warn companies that the FCC will continue to
vigorously pursue those companies that engage in deceptive marketing. The
Advisory is available at
http://transition.fcc.gov/eb/Public_Notices/DA-11-1494A1.html.
For further information, contact Richard A. Hindman at (202) 418-7320.
Please direct media inquiries to David Fiske at (202) 418-0513. News and
other information about the FCC is available at www.fcc.gov
--FCC--
NEWS
Federal Communications Commission
445 12th Street, S.W.
Washington, D. C. 20554
This is an unofficial announcement of Commission action. Release of the
full text of a Commission order constitutes official action.
See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).
News Media Information 202 / 418-0500
Internet: http://www.fcc.gov
TTY: 1-888-835-5322