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FTC takes callingcard company (CTA) to task over hidden fees

Date: 4/7/2008 1:12:32 PM

Consumers who have purchased prepaid calling cards from the company CTA have not received the number of minutes advertised, the Federal Trade Commission alleges. This week it asked a U.S. district court judge to halt the alleged illegal practices of the company, which is a major distributor of prepaid calling cards across the country, and to appoint a monitor to oversee the business.
The FTC estimates that CTAs revenue from the sale of cards exceeded $28 million in just the last quarter of 2007. It charges that CTA misrepresents the number of calling minutes consumers get, fails to disclose that consumers cards will be charged regardless of whether the calls go through and charges hidden fees.

The prepaid phone card industry sells approximately
$4 billion worth of cards per year, the FTC said.

CTA markets the cards primarily to immigrants looking to call friends and family in other countries and sells cards in denominations ranging from $2 to $20 under various brand names. It sells cards for use in calling countries all over the world, as well as cards for domestic calling.

The FTC charged that CTAs advertising posters, which are displayed at small retail outlets such as gas stations, grocery stores and newstands where the cards are sold, misrepresent the number of calling minutes on the cards and fraudulently advertise "no connection fees."

When FTC investigators bought and tested 46 cards, they found none delivered the calling minutes advertised on posters, the FTC said.
For example, the FTC complaint says a card that advertised 40 minutes calling time to El Salvador cut off the call after only 27 minutes. A card that advertised 30 minutes calling time to Egypt cut off the call after little more than 10 minutes.

Posters featured country names and call minutes in 32point type identified fees, the FTC said, and charges at the bottom of the poster in approximately 5point type, using language such as:

"Call time is deducted in threeminute increments to certain destinations. Service fees may apply. Calls placed to mobile telephones may be billed at a higher rate. When using a tollfree number from a pay phone, a $.65 percall surcharge will apply. Application of surcharges and fees may have an effect of reducing total minutes on a card. Main
tenance fees may apply. This card has no cash value and is nonrefundable. Prices and fees are subject to change without notice."

The calling cards carried more than 25 lines of disclosures regarding fees and charges, which are nearly illegible because they are written in font sizes that range from 2 to 4 points, according to the complaint.

Neither the advertising post
ers nor the calling cards disclose that, even if the calls do not go through, the cards are charged fees.

The FTC has asked the court to halt the deceptive practices pending trial and to appoint a monitor to oversee the business. It also will seek a court order to require the defendants to give up any profits from the business.

The FTC complaint named Clifton Telecard Alliance One LLC, doing business as Clifton Telecard Alliance and CTA Inc., and Mustafa Qattous, its principal.

The Commission voted 50 to file the complaint. It was filed in the U.S. District Court for the District of New Jersey, with the assistance of El Salvadors Defensoria del Consumidor, Colombias Super intendencia de Industria y Comercio, the Egypt Consumer Protection Authority, Mexicos Procuraduria Federal del Consumidor, Panamas Autor
idad de Proteccion al Consum idor y Defensa de la Competencia and Perus Instituto Nacional de Defensa de la Competencia y de la Proteccion de la Propiedad Intelectual.

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