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Issue Date: Vol. 52, No. 2, February 2012, Posted On: 2/10/2012

FTC Announces $2.32M Settlement Of Fraudulent Phonecard Lawsuit

by Staff Reporter
telephone card scam, Federal Trade Commission, prepaid telephone cards lawsuit, Millennium Telecard Inc., Millennium Tele Card LLC, Collección Latina Inc., Telecard Center USA Inc., Fadi Salim

WASHINGTON -- The Federal Trade Commission has announced settlement of a lawsuit brought against a marketer of prepaid telephone cards to the immigrant community.

The marketers have agreed to pay $2.32 million to settle claims that the cards did not deliver the promised minutes of calling time, the FTC reported. Charged in the suit were Millennium Telecard Inc.; Millennium Tele Card LLC; Collección Latina Inc.; Telecard Center USA Inc.; and the principal of these companies, Fadi Salim.

The FTC had filed a complaint in the U.S. New Jersey District Court in May 2011. It charged the defendants with targeting immigrants with phonecards bearing brand names including "Africa Magic," "Hola Amigo" and "Viva Ecuador." These cards were sold at newsstands and other kiosks, grocery and convenience stores and a chain of outlets run by the defendants in New Jersey that sold prepaid calling cards at retail and at wholesale.

The FTC alleged that the defendants advertised the cards widely in a variety of ways, including POS posters and on the Internet. The ads made claims about the number of minutes the cards provided to a number of international locations, including Argentina, Brazil, the Dominican Republic, Ecuador, El Salvador, Ghana, Mexico, Nigeria, Pakistan, Poland and Vietnam. 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.

The FTC also alleged that the phonecards carried hidden fees, such as "hang-up" and weekly charges, and that these fees could wipe out the value of the card after even one short call. The fees were disclosed in tiny print, in vague terms difficult to understand in any language.

In addition to paying $2.32 million, the defendants will be barred from misrepresenting the amount of time consumers will receive from prepaid calling cards, and are required to clearly and prominently disclose any fees or charges.

To ensure compliance, the settlement requires defendants to monitor the advertising materials displayed by their distributors and the number of minutes of talk time their prepaid calling cards actually deliver.

The commission vote to approve the proposed consent order was 4-0. It is subject to court approval.

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