FTC Settlement Bars Seller of Prepaid Calling Cards from Deceptive Marketing

A company that allegedly misrepresented the minutes provided by its pre-paid calling cards will be barred from making such deceptive claims under a settlement with the Federal Trade Commission.

According to the FTC’s complaint, filed in May 2012, DR Phone Communications markets and sells prepaid calling cards.  The cards are often sold in grocery and convenience stores, and at kiosks in other retail establishments.  The cards are especially popular with members of immigrant communities, many of whom depend on prepaid cards to stay in touch with family overseas

Since at least September 2010, the complaint states, the calling minutes actually delivered to consumers who bought the defendants’ prepaid cards were substantially less than promised in their marketing, advertising, and promotions.  The FTC bought samples of the defendants’ cards in September 2010 and November 2011, and of the 169 card tested, all failed to deliver the number of minutes prominently advertised on their point-of-sale posters. In all, the defendants' cards delivered on average only 40 percent of the minutes promised, with 52 cards delivering less than 25 percent of the minutes advertised, and 25 cards delivering less than five percent of the minutes advertised.

Based on these results, the Commission charged the defendants with violating the FTC Act by misrepresenting the number of calling minutes the cards would provide, and failing to disclose adequately fees that would reduce the cards’ value, and in turn the number of calling minutes they provide.

The court order settling the FTC’s charges permanently bars the defendants from making any material misrepresentations in connection with the marketing and sale of prepaid calling cards, including those about the number of minutes delivered and per-minute rates.  It also requires the defendants to clearly and prominently disclose all material limitations of their prepaid calling cards, including:

• The existence of all fees and when they will apply;
• That the advertised calling minutes are available only on a single call, if applicable;
• Any limit on the time during which the advertised rates or number of minutes are available; and
• When the calling card expires, if it does.

In addition, the proposed order requires the defendants to put procedures into place for five years to ensure the accuracy of their marketing materials and to prevent retailers from displaying expired marketing materials.  They also are required to end their relationships with any distributor who doesn’t display accurate marketing materials.

Finally, the proposed order imposes a judgment of $61,597.

The FTC has information for consumers interested in purchasing pre-paid phone cards. 

The Commission vote approving the filing of the consent order was 4-0.  It was filed in the U.S. District Court for the Northern District of California on April 22, 2013, and entered by the Court on April 24, 2013.  The order announced today settles the FTC’s charges against DR Phone Communications, Inc., also doing business as DRphonecom.com; and David Rosenthal, individually and as an officer of DR Phone Communications, Inc.

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 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.