FTC Halts Deceptive Prepaid Calling Card Scheme Targeting Immigrants
Cards tested by the agency delivered only 40 percent of the minutes they advertised
Wednesday, July 11, 2012
The feds have shut down another scam targeting immigrants -- this one involving calling cards.
The Federal Trade Commission has halted the deceptive advertising claims of a company that markets prepaid phone cards by allegedly misrepresenting the number of calling minutes its cards provide -- and failing to make adequate disclosure of additional fees. The company agreed to halt its misleading claims, pending a trial in which the agency will seek to halt the deceptive claims permanently and force the company to give up its ill-gotten gains.
The case against DR Phone Communications is part of a continuing FTC effort to address deceptive advertising and marketing practices in the prepaid calling card industry, which sells billions of dollars worth of cards a year -- many of them to immigrants who depend on them to call friends and family in other countries.
The FTC charged that the DR Phone scheme targeted immigrant communities. Using brand names such as "Beautiful Asia," "Vietnam Best," and "Pearls of Africa," the cards were sold in convenience stores, groceries and kiosks across the country and on DR Phone's Website.
According to the FTC, marketing material -- typically point-of-sale posters -- displayed brightly colored text bubbles touting calling minutes to a particular destination with a card of specified amount -- for example, "Philippines 70 min-per $5."
Large letters at the top of the posters claimed, "No Fees," "No Connection Fee," and "No Maintenance Fee." Small print at the bottom of the posters made vague reference to fees without adequately disclosing what those fees would be.
One disclosure simply stated "International calls made to cellular phones and calls via toll free numbers are billed at higher rate." without adequately disclosing what those higher rates would be.
The FTC bought and tested 169 of the company's cards. The agency’s complaint alleged that 100 percent of the tested cards failed to deliver the number of minutes advertised. The worst performing card delivered less than one percent of the advertised minutes. On average, the 169 cards delivered only 40.42 percent of the advertised time.
The FTC charged that the deceptive claims about the calling minutes and the failure to disclose adequately the additional fees and charges violate federal law. As part of an agreement between the defendants and the FTC, the court ordered a temporary halt to the illegal practices, pending trial.
Defendants named in the FTC complaint are DR Phone Communications, also doing business as Drphonecom.com, and David Rosenthal.