Prepaid calling card fraudsters must pay $2.25M for cheating on talk time minutes

Five prepaid calling card companies will be paying a $2.25 million settlement to resolve Federal Trade Commission charges that they cheated consumers out of talk time minutes on prepaid calling cards.

Insidiously the companies targeted their advertising at recent immigrants, who depend on the cards to stay in touch with friends and family in other countries, the FTC said.

In its lawsuit, the FTC charged Alternatel, Voice Prepaid, G.F.G. Enterprises, LLC, also known as Mystic Prepaid, Voice Distributors, Telecom Express, and their principals, Nickolas Gulakos, Moses Greenfield, Lucas Friedlander, and Frank Wendorff misled consumers about the number of minutes of talk time their prepaid calling cards provided. The FTC said its testing showed that consumers received only about half the advertised minutes.

In addition, the FTC alleged that the defendants' cards carried hidden fees. For example, while the defendants' ads for their cards often prominently claimed "no connection fees;" they then failed to clearly disclose a host of random fees, such as "hang-up" and "maintenance" fees and "destination surcharges" that could wipe out the value of the cards. Such fees were, at best, "disclosed" in tiny font in confusing terms that were incomprehensible in any language. At the request of the FTC, shortly after the case was filed, the court issued an order temporarily halting these deceptive practices and appointed a monitor to ensure the defendants' compliance with the law.

The companies are part of the prepaid calling card industry, which sells billions of cards a year, many of them to recent immigrants from Latin America, Africa, and elsewhere from around the globe. The defendants' cards, which retail for $2 to $10, are sold through small retailers such as grocery and convenience stores, gas stations, and newsstands in Florida, Massachusetts, New Jersey, New Hampshire, and Rhode Island.  A recent study said the prepaid calling card industry could rake in some $22 billion by 2012, a number that also includes pre-paid Internet and pre-paid phones.

The FTC is looking to clamp down on prepaid calling card fraudsters. Last year the agency urged congress to adopt pending legislation and bolster the agency's power to further protect consumers from unscrupulous prepaid phone card marketers.  The FTC has also established a joint federal-state task force concerning deceptive marketing practices in the prepaid calling card industry and has other active prepaid calling card investigations.

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