FTC takes aim at prepaid calling card giant

The Federal Trade Commission today asked a U.S. district court judge to halt to the alleged illegal practices of CTA or the Clifton Telecard Alliance, a major distributor of prepaid calling cards in the US.

The FTC charges that CTA misrepresents the number of calling minutes consumers get, fails to disclose that consumers’ cards will be charged whether or not the calls go through, and charges hidden fees. According to the FTC, CTA which is headed by Mustafa Qattous, is a key player in the prepaid phone card industry that sells approximately $4 billion worth of cards a year – primarily to immigrants looking for a cheap and easy way to call friends and family in other countries. In the last quarter of 2007 alone, CTA’s revenue from the sale of cards exceeded $28 million, the FTC said. 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.

CTA sells cards in increments of $2 to $20 under various brand names, and has cards for use in calling countries from Albania to Zimbabwe, the FTC said. They also sell cards for domestic calling.The FTC charged that CTA provides posters to the small retail outlets like gas stations, grocery stores and newstands that sell its cards. The posters advertise the number of calling minutes and brag it offers rates with “no connection fees.”

But consumers who use the calling cards don’t receive the number of minutes advertised. For example, the FTC complaint says a card that advertised 40 minutes calling time to El Salvador cut off the call after only 27 minutes. A card that advertised 30 minutes calling time to Egypt cut off the call in a little over 10 minutes. In fact, the FTC purchased 46 CTA cards in retail stores and tested by them. None of the cards delivered the calling minutes advertised by posters displayed where the cards were purchased.

Indeed the Complaints.com Web site and others have numerous complaints about how the firm has done business, the FTC complaint states.

Neither the advertising posters nor the calling cards disclose that if the calls do not go through, the cards are charged fees anyway. The FTC has asked the court to halt the deceptive practices pending trial, and to appoint a monitor to oversee the business. The agency also will seek a court order to require the defendants to give up any ill-gotten gains.

Layer 8 in a box

Check out these other hot stories:

Superfund pig farm to become $45M solar energy site

Light-up rug saves toes everywhere

Air Force takes synthetic fuel supersonic as energy costs explode

Advanced 2lb radar system bolsters unmanned aircraft

International cyber-cop unit girds for uphill battles

Intellectual property protection needs a kick in the pants

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.

Copyright © 2008 IDG Communications, Inc.