The Prepaid Press - The Legal Line

05/25/2013

The Legal Line

Edition: April 15th, 2005 Edition

Ed Maldonado

Dear Legal Line:

I distribute calling cards in several major metropolitan markets
in northeast. I have one card that has caused me some concern over
the past two months. It’s a super cheap Mexico and South America
card that lists its carrier as an ambiguous acronym (like “ABC”
instead of its real name). Their customer service is handled by
another company when you call them but they do support the cards
for credits and the like under the carrier name listed.

The card was referred to me by a retailer out of Boston. I have
known him for years and he highly recommended as profitable for
resale by retailers and distributors alike. I do trust him. The
card hasn’t failed and still is selling quite well.

The problem is that I feel like it is the calm before the storm.
I checked with other distributors on the prepaidgrapevine.com bulletin
board no one really seemed to know anything about this card. I wonder
if I should be cutting my losses early or keep selling it. How can
I be sure that who I am dealing with is who they say they are?

Distributor On-the-Radar

Dear DOTR,

Let me understand this. Your question is that you are selling a
card of which you really do not know who the carrier is. The card,
however, is running well and consumers are getting response if they
call customer service for issues related to the card. So, there
is no controversy but you feel there is potential because you don’t
know whom your dealing with at the end of the day.

In general, most states’ utility commissions require that
prepaid providers disclose their actual name, or any D/B/A or trade
name used, on their applications for state certification as a long
distance prepaid provider. The idea is that all possible variations
of their name will be listed on their state certification. The States
keep these name on lists, available to the public either online
or in paper form to identify all certified carriers. This is generally
the way you can cross-reference and identify prepaid carriers, provided
that they are actually certified in the states which you are selling.

I assume by virtue of the way you signed your e-mail that you suspect
that these guys are “off-the-radar” and have little
or no state certification to provide prepaid calling cards. Should
this be the case, you will need to be more creative. First, check
your particular state’s Office of the Secretary of State,
Division of Corporations, to see if the acronym is a trade or service
mark or a d/b/a at the state level. Next, check the USPO to see
if the carrier is simply using a federal service mark. Finally,
check all paperwork in the stream of commerce that is related to
the cards. For example, if you are billed by invoice – who
appears on the invoice as the payee. Ask yourself are they a carrier
or a reseller and cross reference the acronym under their corporate
names as a trade or service mark registered at the state or federal
level.

If these efforts yield no results, there is one last way that you
can confirm them from independent public records. This is by virtue
of Section 214 Authority. These records are available online and
can be accessed through the FCC’s website. The reality about
this whole issue is that both state and federal regulation require
that carriers and providers utilize the name that appears on any
certification or licensure. Most carriers do license and certify
themselves, but many do not. Their arguments for not doing so range
from being a pure consumer prepaid VoIP provider exempt from all
regulation to it being a cost prohibitive process. These arguments
really have little to no merit.

Being “off-the-radar” is usually for the purpose of
being able to either “disappear” or bankrupt themselves
without a line of creditors, distributors, or consumers on their
tail. This usually is accompanied by indications of bad service
– consumer and retailer returns, complaints to utility commissions,
sweeping of cards at illegal and excessive rates and etc. The fact
that your anonymous card is selling well and being supported well
by customer service leads me to believe that the provider may be
using a trade name or other registered fictitious name. However,
you should check them out thoroughly.

In general, it is advisable to ask new card providers for their
certified name and the states they are authorized to provide services
in before you distribute on a large scale. A good way to do this
is to work under a contract wherein they warrant, or promise, that
they are who they say, and have all regulatory authorizations to
do so. In saying this, I recognize that most distribution deals
are done more on a handshake than a contract. Therefore, representations
made via e-mail or correspondence may also be good evidence of who
is who should things go bad. Never trust simply an e-mail address
or letterhead since these items can be forged easily and frequently.
Using common sense is always the best defense to getting burned
in the prepaid marketplace and getting a confirmable carrier name
is a must.

It would also be advisable to consult your attorney immediately
if this cards starts to get shaky in service or customer service.
Since it is unclear if anything beyond a potential problem exists
here, it would be wise to be weary of any sudden or dramatic changes
in business. Should this occur you may have legal recourse from
both a civil action or administrative proceedings depending on the
way it actually occurs and how much time you have to respond. So
definitely keep those topics in mind when you speak with your attorney.
I hope this dose of preventative medicine helps.

Good Luck and Success in the Industry.

Do you have questions for Legal Line? Send them to legalline@prepaid-press.com.