In a case that could set the standard for states dealing with calling card issues, Florida Attorney General Bill McCollum announced, on June 11, that his office has reached a resolution of an action that began in August 2007. The nine companies have agreed to cease all deceptive advertising, provide 100 percent of the minutes advertised, and submit to three years of auditing by the Office of the Attorney General to ensure that they are following the terms of their agreement.

The companies will also collectively reimburse the Attorney General’s Office more than $1 million for the cost of its investigation and future enforcement efforts.

The companies signing agreements with the Attorney General’s Office are IDT America, Inc.; Union Telecard Alliance (UTA); Total Call International, Inc.; Blackstone Calling Card, Inc.; CVT Prepaid Solutions, Inc.; Dollar Phone Enterprise, Inc.; STi Prepaid, LLC; Alternatel, Inc; and Cristel Telecommunications, LLC. The Attorney General specifically praised IDT, an international prepaid calling card provider that approached the Attorney General’s Office with information about the problems in the industry and cooperated fully with the investigation.



Background of the Action

The original action involved four Florida based service providers and six non-Florida based companies. The Florida companies who were served were: Blackstone Calling Card Inc. in Miami; Alternatel Inc. in Pembroke Pines; Prima, known as PCI, in Doral, and Cinco Telecom, doing business as Orbitel, in Miami. Other companies the attorney general’s office is seeking more information from are CVT Prepaid Solutions Inc.; Cristel Telecom; STi Prepaid LLC, doing business as STi; Union Telecard Alliance, also known as UTA; IDT America Corp. and Total Call International Inc., also known as Total Call Mobile Inc.

The investigation by the attorney general’s office was focused on marketing, and looked into questionable marketing tactics by companies selling prepaid calling cards to Florida residents. Subpoenas that were served in July 2007 by the Attorney General’s Economic Crimes Division sought information about advertisements on posters and on radio about the number of minutes provided on prepaid calling cards.

But the issue had deeper roots. In January 2007, IDT and its prepaid calling card subsidiary, Union Telecard Alliance, UTA, settled a class action suit over U.S. customers who purchased IDT calling cards from 1997 to January 22, 2007. The suit centered around the disclosure of terms on rechargeable calling cards, resulting in an alleged “dramatic” difference between quoted minutes available on the card and what consumers actually got. While IDT denied any wrongdoing, it agreed to settle the suit, it said, to eliminate litigation costs and uncertainties.

On March 8, 2007, IDT then sued six of its competitors, including some of the companies named in the Attorney General’s action, CVT, STi, and Total Call International. The suit alleged that the companies named were not delivering advertised minutes on prepaid calling cards, as was alleged in the class action suit.

The other defendants named in the IDT suit were: CVT Prepaid Solutions, Inc, Dollar Phone Corp. (Dollar Phone Enterprises, Dollar Phone Access), Epana Networks Inc., Locus Telecommunications, Inc., Total Call International, and STi Inc. (Find & Focus Abilities, and VOIP Enterprises, Inc.).

The Attorney General’s Economic Crimes Division launched an investigation last July after receiving more than 200 complaints about the industry’s practices. Prior to the investigation, consumers complained that companies within the industry often utilized hidden or inadequately disclosed fees and charges such as “hang-up fees,” periodic maintenance fees and destination surcharges. In some cases, call lengths were rounded up to the nearest three- or four-minute increment, thus making a call just over one minute count as a four-minute charge on the card.

There was a suspicion that IDT may have been involved in instigating the Florida Attorney General’s action. When asked about IDT’s involvement in the action, Sandie Copes, a spokeswoman for the Attorney General’s office, told TPP last year that the Attorney General’s office was aware of the IDT suit and was keeping an eye on it. She also said that IDT was “cooperating” with the investigation.

The investigation focused on the sales of calling cards to people who the Attorney General’s office feared might be victimized because they don’t speak or read English or Spanish well enough to understand the terms and conditions of the cards, or because they are desperate to make calls back to their home countries.

Part of the motivation for the suit was a study done by The Hispanic Institute. In the study, a group of prepaid calling cards were tested and found to deliver about 60 percent of the minutes advertised, on average. Advertisements used by investigators with the Attorney General’s Office seemed to indicate that the industry’s target market was non-English speaking Floridians, many who were purchasing the cards to contact friends or family members in other countries.

“Companies should never be permitted to prey on their consumers’ essential need to communicate with loved ones,” said Gus West, Executive Director of The Hispanic Institute. “On behalf of The Hispanic Institute and Latino America, we commend Attorney General McCollum for being the national leader in combating calling card fraud.”



Agreement Impacts Other Companies

Under the agreement, prepaid calling card businesses wishing to participate in the prepaid calling card market in Florida must meet certain requirements. For example, they must compete on quality and service, and not use hidden fees or misleading minute calculations to increase their profits at the consumers’ expense. Disclosures must be printed in any language used in the advertisement. The Attorney General’s office will look for a clear representation of the exact number of minutes available on each card and the card expiration dates must be clearly displayed. There will also be no surcharges resembling taxes, and calls will only be rounded up to the nearest one-minute increment. All additional limitations or terms of use must be clearly provided, according to the Attorney General’s press release.

The Attorney General’s Office will continue to work with these companies in a continuing effort to monitor misleading advertising within the prepaid long distance phone card industry and some investigations are still ongoing. Consumers affected by these or other practices may file a complaint by visiting the Attorney General’s website at http://www.myfloridalegal.com or calling the fraud hotline at 1-866-966-7226. The investigation was greatly assisted by the staff members of the Florida Public Service Commission who helped test numerous prepaid calling cards.

“The calling card industry has long been targeting non-English speakers and cheating consumers for whom these cards are often a lifeline to loved ones,” said Attorney General McCollum. “Through today’s settlements, we are instituting industry-wide reforms and we expect accountability from these companies.”