A convenience store near my apartment is currently selling “RED Washington” prepaid phone cards. The cards are sold by “value.” For example, there is a “$2 card.” The front of the card shows $2, the cost of the card. Here are the terms printed in very fine print on the back of the card:
- 69 cent fee applied the first day after first use and again every 14 days thereafter
- after 1st minute, calls rounded up to the nearest three minute interval
- advertised minute and rates based on single call from U.S. using local access
- $1 surcharge applies to each call from a payphone
- USF surcharge applies to total cost of each US inter-state call
- calls made from toll free access are billed at higher per minute rate
- rates and fees are subject to change without notice
- card expires on earlier of six months from first use or 02/2014
The card nowhere says how much a call costs. The card states that for rate inquires, the customer should dial the access number and press *0. I did that. After going through several menus, I was asked to enter the telephone number that I wanted to call. The service confirmed the number I entered, and then stated, “error processing request.” Thinking this was just a temporary system malfunction, I tried again a week later. Same “error processing request.”
The service has an option to speak with a customer service representative. I asked the customer service representative what the price for making a call is. The customer service representative then asked for the PIN number of my calling card. A calling card user should keep the PIN number secret. With the PIN number, anyone can drain money from the card. I refused to give the PIN number for my card to the customer service representative. He said he couldn’t tell me the calling rates without my telling him my calling card’s PIN number.
A reasonable means for finding out how much a call actually costs using a RED Washington prepaid phone card doesn’t seem to exist. Judging from the fragmentary terms printed on the card, I would guess that the price is very high. So what’s the value of $2 RED Washington prepaid phone card? To me, it’s $2 spent to learn the astonishing ways in which a company can abuse its customers.
Stopping deceptive service marketing practices seems to be a difficult challenge. The Federal Trade Commission (FTC) has testified to Congress about consumer protection issues associated with prepaid phone cards. In August, 2009, the Federal Trade Commission (FTC) “extended its crackdown in the billion-dollar prepaid calling card industry”:
The Federal Trade Commission extended its crackdown in the billion-dollar prepaid calling card industry, asking a U.S. district court to permanently halt the illegal practices of a major calling card distributor and its principals. The FTC has charged Diamond Phone Card, Inc., a distributor of prepaid calling cards based in Elmhurst, New York, and its principals with advertising that the calling cards they sold provided more minutes than they actually delivered. The complaint also alleges that the defendants failed to adequately disclose fees that could reduce the value of the calling cards. The FTC is seeking to force the defendants to give up the money they made through their deceptive tactics. (press release)
This action follows settlements on similar actions:
In February 2009, Alternatel, Voice Prepaid, and Mystic Prepaid agreed to pay $2.25 million to resolve FTC allegations that they had deceived consumers. In June 2009, another leading distributor of prepaid cards, Clifton Telecard Alliance, agreed to pay $1.3 million to settle similar FTC charges. The FTC has established a joint federal-state task force to address deceptive advertising and marketing practices in the prepaid calling card industry. (press release)
The FTC achieved another settlement in February, 2012:
An operation that marketed prepaid calling cards to immigrants has agreed to pay $2.32 million as part of a settlement to resolve Federal Trade Commission charges that they made false claims to consumers about the number of minutes of talk time their prepaid calling cards would deliver. (press release)
The economics of these enforcement actions probably aren’t propitious. Purchasing services isn’t like a simple exchange of a fixed amount of money for a concrete thing. New approaches seem to be needed to address successfully complicated, deceptive service terms.
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