The Federal Trade Commission recently began a new investigation regarding complaints that a prepaid calling card company’s products and services were being deceptively advertised. It found that some of the prepaid card sold by DR Phone provided only 40% of the minutes that the consumers actually paid for, most of who were immigrants. Not only that, but the government agency also discovered the company was in no way clear in terms of the fee structures associated with using their prepaid cards.
DR Phone has agreed to rescind any of the claims and statements the FTC insists are misleading. The case is expected to end up in a court and the government is hoping it can eliminate all of the deceptive claims while also forcing the company to refund those monies gained in any misleading fashion. But this isn’t the first time the prepaid phone card company has found itself in hot water.
The FTC has had an open case against the prepaid phone card company as it’s investigated several different complaints, including deceptive advertising and unfair fees that weren’t told to consumers until their saw their credit card or debit card charged for them. DR Phone knows, according to the FTC, immigrants rely on prepaid cards in order to keep contact with their family members, which can leave some vulnerable to deception.
In the filing, the FTC charged that DR Phone Communications targeted immigrant communities by using brand names such as “Beautiful Asia,” “Vietnam Best” and “Pearls of Africa”. The prepaid cards were sold in a myriad of places such as curb stores, kiosks and grocery stories around the country. They were also marketed and sold on the company’s website, which required the use of a prepaid debit card or other credit card.
The marketing and advertising efforts of the company, which were usually placed at “point of sale” areas near the cash register, were colorful, sometimes in English and/or Spanish and promised $5 phone calls to countries such as the Philippines. Those marketing materials also included promises of no fees – whether they were considered connection fees or maintenance fees.
As part of its investigation, the FTC chose random cards in several locations. Of the 169 prepaid cards tested, 100% did not deliver what their advertising and marketing material promised – some notations were minimal, though others were not and included not receiving the number of available minutes that the cards were supposed to have. In one case, one card delivered less than one percent of what it was advertised to provide. As a result of those investigations, the FTC says these failures violate current federal laws. The judge did agree, however, to put a stop any illegal practices until it could be worked out in a courtroom.
The lawsuit names three defendants, including DR Phone Communications, Drphonecom.com and David Rosenthal. It’s currently in the Northern District of California, San Francisco Division.
This federal agency works on behalf of American consumers in order to prevent or eliminate deception, fraud or unfair business practices. It also works to catch those unfair business practices. It must also be noted that the company hasn’t been found guilty in this particular lawsuit, though it is slated to go to court in the next several months. Consumers who wish to file a complaint can do so by calling 1-877-FTC-HELP (1-877-382-4357).
- FTC Warns of Prepaid Card Scams – May 23, 2013