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                                                                   DA 11-1494

                                                            September 1, 2011

                                             Enforcement Advisory No. 2011-10

                             PREPAID CALLING CARDS

   ENFORCEMENT BUREAU PROPOSES SIGNIFICANT PENALTIES FOR DECEPTIVE MARKETING
      OF PREPAID CALLING CARDS; CONSUMERS ADVISED TO CAREFULLY REVIEW CARD
                                 ADVERTISEMENTS

   Today, the Federal Communications Commission acted on four major
   investigations by the Enforcement Bureau involving companies that appear
   to have deceptively marketed prepaid calling cards, proposing substantial
   penalties of $5 million per company. In these cases, the Commission found
   that the companies apparently marketed prepaid calling cards, primarily to
   immigrants, with claims that an inexpensive card would allow the buyer to
   make hundreds or even thousands of minutes of calls to foreign countries.
   It appears, however, that because the companies assessed multiple fees and
   surcharges, consumers might receive only a small fraction of the
   advertised minutes. We are issuing this enforcement advisory to alert
   companies that we are monitoring prepaid calling card practices, and will
   continue to take aggressive action against companies engaged in unfair and
   deceptive advertising to consumers. We also urge consumers to protect
   themselves by reviewing advertisements for prepaid calling cards
   carefully, including reading the fine print, to ensure that they
   understand what they are actually buying.

   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..." The FCC has found companies liable for unfair and deceptive
   marketing as an "unjust and unreasonable practice" under section 201(b).

   Applying section 201(b) in today's prepaid calling card cases, the FCC
   found that the companies involved apparently deceptively represented to
   buyers of their calling cards 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 consumers know when purchasing prepaid calling cards?  When
   consumers buy prepaid calling cards, they are paying in advance for an
   amount of telephone calling time. Some calling cards, however, come with
   fees that can significantly reduce the amount of calling time from the
   amount that is advertised. Because consumers pay for these cards in
   advance - usually at retail businesses that do not provide the phone
   service - it is critical that consumers carefully read the advertisements
   or other marketing materials, including any fine print on the packaging or
   the back of the card itself, so they are aware of fees associated with use
   of the card. These fees can include "post-call," "disconnect," and
   "hang-up" fees that are deducted from the card's value each time the
   consumer hangs up the phone after using the card, or "maintenance" fees
   that are deducted shortly after the consumer uses the card and again at
   regular intervals. Consumers should also make sure they know whether the
   advertised minutes apply only if the card is used to make a single call,
   or whether the number of minutes advertised can instead be used over the
   course of multiple calls without any penalty. In addition, they should
   check to see if they will be charged for using a "toll-free access" number
   to place the call. Finally, prepaid calling cards often have expiration
   dates. Consumers should be sure to keep track of the date on which the
   card expires so that any unused minutes are not lost.

   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 today's proposed forfeitures, cited above, as they relate
   to carriers' advertising and marketing practices. We encourage companies
   to provide sufficient 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? For additional information, contact Richard A.
   Hindman of the Enforcement Bureau at 202-418-7320. Please direct media
   inquiries to David Fiske at 202-418-0513 or david.fiske@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).

   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 STi Telecom Inc., formerly
   Epana Networks, Inc., FCC 11-129 (rel. September 1, 2011); Locus
   Telecommunications, Inc., FCC 11-130 (rel. September 1, 2011); Lyca Tel,
   LLC, FCC 11-131 (rel. September 1, 2011); Touch-Tel USA, LLC, FCC 11-132
   (rel. September 1, 2011).

                                  Page 2 of 2

   PUBLIC NOTICE

                                   Page 1of 2

   PUBLIC NOTICE

                            FCC ENFORCEMENT ADVISORY

   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

                                        News Media Information 202 / 418-0500

                                                 Internet: http://www.fcc.gov

                                                          TTY: 1-888-835-5322

   Federal Communications Commission

   445 12th St., S.W.

   Washington, D.C. 20554