FTC: phone card scam leads to $2.3M settlement

February 1, 2012 - 2:55 PM

WASHINGTON (AP) — The target was immigrants lured by cheap phone-card prices so they could call loved ones back home. But the calling cards delivered far fewer calling minutes than promised, and now their marketers will have to hand over $2.3 million to the federal government.

The Federal Trade Commission announced the settlement Wednesday in what it described as a vast prepaid calling-card scheme that scammed tens of thousands of people nationwide.

The settlement with New Jersey-based Millennium Telecard, Inc., Telecard Center USA, Inc., and several other companies owned by the same man — Fadi Salim — is the biggest settlement of its kind in the prepaid calling-card industry. A call to Salim's attorney was not immediately returned.

Here's how it worked: people bought prepaid cards with names such as "Africa Magic" and "Hola Amigo" for calls to Nigeria, Ghana, Mexico and other international locations. But the cards, the FTC said, often delivered less than half of the minutes promised because of all sorts of hidden fees.

There were fees for simply hanging up the phone. Other fees were applied on the first day, just for using the card, and every seven days afterward.

Before too long, the fees could wipe out the value of the card even with a short call, the agency said.

The cards included disclaimers about the fees, but the commission said the print was so small it was nearly impossible to read.

The FTC did its own testing on the cards and found that they delivered an average of only 45 percent of the advertised minutes. For example, one card that sold for $2 and was marketed as carrying 44 minutes of calling time to a landline in Guatemala only delivered 18 minutes and 27 seconds.

The cards were sold over the Internet as well as at newsstands, grocery and convenience stores and at kiosks nationwide. They carried brand names such as "Absolute," ''Digital," and "Pan Caliente."