Prepaid Phone Card Marketers Agree to Pay $2.32 Million to Settle FTC Charges

An operation that marketed prepaid calling cards to immigrants has agreed to pay $2.32 million as part of a settlement to resolve Federal Trade Commission charges that they made false claims to consumers about the number of minutes of talk time their prepaid calling cards would deliver.

The settlement is part of an ongoing 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. It resolves claims brought by the FTC against defendants Millennium Telecard, Inc.; Millenium Tele Card, LLC; Coleccion Latina, Inc.; Telecard Center USA, Inc.; and their principal Fadi Salim.

In May, 2011, the FTC filed a complaint in U.S. District Court in New Jersey, charging that the defendants targeted immigrants using calling cards with names such as "Africa Magic," "Hola Amigo," and "Viva Ecuador." According to the FTC complaint, the defendants' prepaid calling cards are sold directly to consumers over the Internet using their own websites. The cards also are sold at newsstands, grocery and convenience stores, and kiosks nationwide. In addition, the defendants own stores in New Jersey where they sell prepaid calling cards on a retail and wholesale basis.

The FTC complaint alleged that the defendants advertised the cards widely in a variety of ways, including point-of-sale posters and on the Internet. These ads made bold claims about the number of minutes calling cards provided to a wide range of international locations, including Argentina, Brazil, the Dominican Republic, Ecuador, Mexico, Pakistan, Poland, Vietnam, Ghana, Nigeria, and El Salvador. But the FTC alleged that consumers didn't receive the number of minutes advertised. In extensive testing of the defendants' cards conducted by the FTC between August 2010 and March 2011, the cards delivered an average of only 45% of the advertised minutes. Of the 141 cards tested, 139 – more than 98% – failed to deliver the number of minutes advertised on the point-of-sale posters.

The FTC also alleged the cards carried hidden fees, such as "hang-up fees" and weekly fees. The agency charged the fees could wipe out the value of the card after even one short call. Such fees were disclosed in tiny print and in vague terms that were hard to understand in any language.

In addition to paying $2.32 million, the defendants will be barred from misrepresenting the amount of time consumers will receive from prepaid calling cards, and required to clearly and prominently disclose any fees or charges. To ensure compliance, the settlement requires defendants to routinely monitor the advertising materials displayed by their distributors and the number of minutes of talk time their prepaid calling cards deliver to consumers.

The Commission vote to approve the proposed consent order was 4-0. It is subject to court approval. The FTC filed the proposed consent order in the U.S. District Court for the District of New Jersey.

NOTE: This consent order is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.

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