2008-10-17 / Columnists

Notes On Consumer Affairs

By Assemblywoman Audrey Pheffer

AUDREY PHEFFER AUDREY PHEFFER Prepaid phone cards offer a convenient and often inexpensive way for consumers to place calls to domestic and international phone numbers. Competition between card providers and the advent of new technologies in the telecommunications industry have lowered prices and increased the availability of cards in the marketplace. Despite these advances, however, according to a recent study and a Federal Trade Commission investigation, it appears that a segment of the prepaid phone card industry is plagued with fraud. As such, consumers should be very careful when selecting a card.

A 2007 study commissioned by the Hispanic Institute tested a range of international prepaid phone cards. The results were disheartening to say the least. The study found that, on average, the cards tested provided only sixty percent of the minutes promised. Of the forty-five cards tested, seven were inoperative, and eight failed to facilitate a call nearly fifty percent of the time. A recent Federal Trade Commission (FTC) investigation into five prepaid phone card providers found that the providers' cards only delivered fifty percent of the total minutes advertised. In addition, the FTC found that many of the cards they examined carried hidden fees, and many terms and conditions were disclosed in miniscule, nearly unreadable fonts.

Section 92-f of the Public Service Law regulates the marketing of prepaid phone cards in New York State. The statute requires entities offering prepaid phone cards to provide consumers with several important disclosures, including any expiration policy, fees or surcharges, and the minimum charge per call. The statute also requires entities to maintain a toll-free customer service telephone number with a live operator to answer incoming calls to receive customer complaints and to provide information

regarding card fees and policies. The Committee recently reported legislation aimed at improving the law and addressing abuses that have arisen in the prepaid phone card industry (A.10350-A, Rivera, P.) If the bill became law, prepaid service providers would be required to register with the New York Public Service Commission (PSC) and disclose certain

consumer protection information in all advertising and on prepaid calling cards. In addition, the bill would require prepaid phone card advertisements, point-of-sale materials, and voice prompts to accurately identify the number of minutes of communication time that the cards can deliver.

If you are in the market for a prepaid phone card, consider the following tips from the FTC. First, examine the card's packaging or in-store advertising to find out the domestic and international rates. If you can't find the rate, consider buying a different card. Keep an eye out for disclosures about surcharges, "maintenance" fees, and any fees for placing calls from a pay phone, to a cellphone, or using a toll-free access number. Compare the rates offered by different cards. Very low rates, particularly for international calls, may be a red flag indicating that the card won't deliver the number of advertised minutes.

Before buying a card, make sure you understand the instructions on the card. Lastly, consider asking the retailer if they will stand behind the card if it fails to deliver the number of minutes advertised.

For more information about prepaid phone cards, you may want to view the FTC's fact sheet on the topic at: http://www.ftc.gov/bcp/edu/pubs/con sumer/products/pro04.shtm.

To file a complaint regarding calling cards, visit the PSC's website at: http:// www.dps.state.ny.us/complaints.html or call 1-800-342-3377.

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