Prepaid Calling Card Distributor Agrees to Pay $1.3 Million

A U­SA based distributor of prepaid calling cards has agreed to pay US$1.3 million to settle Federal Trade Commission charges that the calling cards failed to deliver the number of minutes advertised. In tests conducted by the FTC, the calling cards on average provided less than half of the advertised calling minutes.

The settlement resolves a lawsuit the FTC filed in April, 2008 against New Jersey-based calling card company Clifton Telecard Alliance One (CTA) and its owner, Mustafa Qattous. The FTC charged that the company misrepresented the number of calling minutes consumers would get with its calling cards, charged hidden fees, and failed to disclose that consumers' cards will be charged whether or not the calls are connected.

In the multi-billion dollar prepaid calling card industry, CTA is a major distributor of prepaid calling cards. CTA markets cards under a variety of brand names, including "African Dream" and "CTA Mexico," primarily to immigrants who rely on the cards to call friends and family in other countries.

As part of the settlement announced today, the court entered a judgment of US$24.4 million against CTA, suspending all but US$1.3 million of that amount. The settlement also bars CTA from misrepresenting the number of minutes of talk time a consumer will receive using a prepaid calling card. The company is required to clearly and conspicuously disclose any material limitations on the use of a prepaid calling card, including any fees or other charges.

The settlement is part of an ongoing FTC crackdown on fraud in the prepaid calling card industry. In February 2009, the FTC announced that another major group of major prepaid calling card companies agreed to pay $2.25 million to settle similar charges. The FTC has established a joint federal-state task force concerning deceptive marketing practices in the prepaid calling card industry, and continues to investigate other prepaid calling card operations.

The Commission vote to approve the settlement was 4-0. The settlement was filed in the U.S. District Court for the District of New Jersey, and approved by the court.

Posted to the site on 30th June 2009