Court Halts Bogus Prepaid Calling Card Claims; FTC Alleges Cards Failed to Deliver the Advertised Minutes

At the request of the Federal Trade Commission, a U.S. district court has ordered a temporary halt to the deceptive advertising claims used to promote prepaid phone cards marketed by Millennium Telecard, Inc. The FTC alleges the marketers misrepresent the number of calling minutes their cards deliver and fail to adequately disclose fees that could reduce the value of the cards.

The defendants are part of an industry that sells billions of dollars worth of prepaid calling cards a year, many of which are sold to immigrants who depend on them to call friends and family in other countries. The defendants’ prepaid calling cards are sold directly to consumers over the Internet using their own websites. The cards also are sold at newsstands, grocery and convenience stores, and at kiosks nationwide. In addition, the defendants own stores located in New Jersey where they sell prepaid calling cards on a retail and wholesale basis.

According to the FTC complaint, the defendants market their prepaid calling cards under a variety of names such as “Africa Magic,” “Hola Amigo,” and “Viva Ecuador.” They advertise the cards widely in a variety of ways, including point-of-sale posters and on the Internet. These ads make bold claims about the number of minutes calling cards provide to a wide range of international locations such as Argentina, Brazil, the Dominican Republic, Ecuador, Mexico, Pakistan, Poland, Vietnam, Ghana, Nigeria, and El Salvador. But the FTC alleges that consumers don’t receive the number of minutes advertised. In fact, in extensive testing of the defendants’ cards conducted by the FTC between August 2010 and March 2011, the cards delivered an average of only 45% of the advertised minutes. Of the 141 cards tested, 139 – more than 98% – failed to deliver the number of minutes advertised on the point-of-sale posters.

In addition, the FTC alleges the cards carry hidden fees. The defendants’ ads fail to clearly disclose there are other charges, such as “hang-up fees” and weekly fees that can wipe out the value of the card after even one short call. Such fees are disclosed in a tiny font and in vague terms that are hard to understand in any language.

The FTC charged that the defendants’ deceptive practices violate federal law. At the request of the FTC, the court has issued an order halting the deceptive practices, frozen the defendants’ assets, and appointed a receiver to temporarily assume control of the corporate defendants. At trial, the FTC will seek a permanent halt to the deceptive practices and an order requiring the defendants to provide consumer refunds or give up their ill-gotten gains.

The defendants named in the FTC complaint are Millennium Telecard, Inc.; Millenium Tele Card, LLC; Coleccion Latina, Inc.; Telecard Center USA, Inc.; and their principal Fadi Salim.

The Commission vote authorizing the staff to file the complaint was 5-0. It was filed in the U.S. District Court for the District of New Jersey.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.