Prepaid Calling Card Distributor Agrees to Pay $1.3 Million

A leading U.S. distributor of prepaid calling cards has agreed to pay $1.3 million to settle Federal Trade Commission charges that the calling cards failed to deliver the number of minutes advertised. In tests conducted by the FTC, the calling cards on average provided less than half of the advertised calling minutes.

The settlement resolves a lawsuit the FTC filed in April, 2008 against New Jersey-based calling card company Clifton Telecard Alliance One, LLC (CTA) and its owner, Mustafa Qattous. The FTC charged that the company misrepresented the number of calling minutes consumers would get with its calling cards, charged hidden fees, and failed to disclose that consumers’ cards will be charged whether or not the calls are connected.

In the multi-billion dollar prepaid calling card industry, CTA is a major distributor of prepaid calling cards. CTA markets cards under a variety of brand names, including “African Dream” and “CTA Mexico,” primarily to immigrants who rely on the cards to call friends and family in other countries. Its cards are sold through a large network of retailers, gas stations, and other outlets. The cards come in denominations ranging from $2 to $20, and can be used to call hundreds of countries around the world. CTA also sells cards for domestic calling.

As part of the settlement announced today, the court entered a judgment of $24.4 million against CTA, suspending all but $1.3 million of that amount. The settlement also bars CTA from misrepresenting the number of minutes of talk time a consumer will receive using a prepaid calling card. The company is required to clearly and conspicuously disclose any material limitations on the use of a prepaid calling card, including any fees or other charges.

The settlement is part of an ongoing FTC crackdown on fraud in the prepaid calling card industry. In February 2009, the FTC announced that another major group of major prepaid calling card companies agreed to pay $2.25 million to settle similar charges. The FTC has established a joint federal-state task force concerning deceptive marketing practices in the prepaid calling card industry, and continues to investigate other prepaid calling card operations.

The Commission vote to approve the settlement was 4-0. The settlement was filed in the U.S. District Court for the District of New Jersey, and approved by the court.

The Commission wishes to thank for their invaluable assistance with this case the Offices of the Attorneys General for New Jersey, Michigan, and Washington, as well as El Salvador's Defensoría del Consumidor, the Egypt Consumer Protection Authority, and Mexico's Procuraduría Federal del Consumidor (PROFECO).

NOTE: Stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.