A company that allegedly misrepresented the minutes provided by its pre-paid calling cards will be barred from making such deceptive claims under a settlement with the Federal Trade Commission.
DR Phone Communications markets and sells prepaid calling cards, according to the FTC's complaint, filed in May 2012.
The cards are often sold in grocery and convenience stores, and at kiosks in other retail establishments. The cards are especially popular with members of immigrant communities, many of whom depend on prepaid cards to stay in touch with family overseas
Since at least September 2010, the calling minutes actually delivered to consumers who bought the defendants’ prepaid cards were substantially less than promised in their marketing, advertising and promotions, according to the complaint.
The FTC bought samples of the defendants’ cards in September 2010 and November 2011, and of the 169 card tested, all failed to deliver the number of minutes prominently advertised on their point-of-sale posters. In all, the defendants' cards delivered on average only 40% of the minutes promised, with 52 cards delivering less than 25% of the minutes advertised, and 25 cards delivering less than 5% of the minutes advertised.
Based on these results, the FTC charged the defendants with violating the FTC Act by misrepresenting the number of calling minutes the cards would provide, and failing to disclose adequately fees that would reduce the cards’ value, and in turn the number of calling minutes they provide.
The court order settling the FTC’s charges permanently bars the defendants from making any material misrepresentations in connection with the marketing and sale of prepaid calling cards, including those about the number of minutes delivered and per-minute rates. It also requires the defendants to clearly and prominently disclose all material limitations of their prepaid calling cards, including:
• The existence of all fees and when they will apply;
• That the advertised calling minutes are available only on a single call, if applicable;
• Any limit on the time during which the advertised rates or number of minutes are available; and
• When the calling card expires, if it does.
The proposed order also requires the defendants to put procedures into place for five years to ensure the accuracy of their marketing materials and to prevent retailers from displaying expired marketing materials. They also are required to end their relationships with any distributor who doesn’t display accurate marketing materials.
Finally, the proposed order imposes a judgment of $61,597, representing the total amount consumers lost using the cards between September 2010 and June 2012.