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FTC Says Calling Card Distributor Shortchanged Consumers

Tests showed cards had fewer minutes than advertised

July 1, 2009

A leading distributor of prepaid calling cards has agreed to pay $1.3 million to settle Federal Trade Commission charges that the calling cards failed to deliver the number of minutes advertised.

In tests conducted by the FTC, the calling cards on average provided less than half of the advertised calling minutes.

The settlement resolves a lawsuit the FTC filed in April 2008 against New Jersey-based Clifton Telecard Alliance One, LLC (CTA) and its owner, Mustafa Qattous.

The commission charged that the company misrepresented the number of calling minutes consumers would get with its calling cards, charged hidden fees, and failed to disclose that consumers’ cards would be charged whether or not the calls are connected.

CTA is a major player in the multi-billion dollar prepaid calling card industry. It markets cards under a variety of brand names, including “African Dream” and “CTA Mexico,” primarily to immigrants who rely on the cards to call friends and family in other countries.

The cards, sold through a large network of retailers, gas stations, and other outlets, come in denominations ranging from $2 to $20, and can be used to call hundreds of countries around the world. CTA also sells cards for domestic calling.

As part of the settlement announced, the court entered a judgment of $24.4 million against CTA, suspending all but $1.3 million of that amount. The settlement also bars CTA from misrepresenting the number of minutes of talk time a consumer will receive using a prepaid calling card.

The company is required to disclose to clearly and conspicuously any material limitations on the use of a prepaid calling card, including any fees or other charges.

The settlement is part of a continuing crackdown on fraud in the prepaid calling card industry. In February 2009, the FTC announced that another major group of major prepaid calling card companies agreed to pay $2.25 million to settle similar charges.

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