Illinois Targets Pre-Paid Calling Cards

August 25, 2004

Prepaid Calling Cards • California Gets Judgment Against Calling Card Company • New Jersey Calls 'Time Out' On Prepaid Calling Cards • FTC Backs Crackdown on Pre-Paid Phone Card Abuses • Texas Sues Prepaid Calling Card Company • Illinois Targets Pre-Paid Calling Cards • IDT Calling Card Charges Probed • AT&T Faces $500 Million Phone Card Payment

Illinois is cracking down on pre-paid calling cards. A new law gives the Illinois Commerce Commission (ICC) authority over companies that sell pre-paid calling cards and gives prosecutors enhanced powers to pursue fly-by-night operators under consumer fraud laws.

Governor Rod Blagojevich's signing of the bill into law makes Illinois the 11th state in the nation to crack down on an industry that to date has operated without much oversight, allowing it to victimize consumers, particularly minorities.

Illinois Attorney General Lisa Madigan says that while legitimate providers of pre-paid calling cards exist, too often these cards are "only worth the plastic they are printed on."

She says that with more specific disclosure requirements, these companies can now be held more accountable for specific violations under the state's consumer fraud laws. As Madigan puts it, "If this were an Olympic event, some of these bad players would win the gold for cheating consumers who just want to call home to talk to their families and friends."

The new law gives the ICC the power to require certification of sellers of pre-paid calling cards and creates regulations requiring minimum quality service standards. Madigan says that by requiring this certification, retailers must ensure that sellers of the cards are certified by the ICC.

The bill also provides Madigan's office with enhanced powers to pursue fraudulent providers. While the attorney general always has had the jurisdiction under Illinois' consumer fraud laws to pursue deceptive practices with regard to prepaid calling cards, the new regulations give Madigan's office more power to enforce violations of specific disclosure requirements.

On the card, those specific disclosures include the full name of the provider, the toll-free customer service number, a local toll-free access number for a retailer and a refund policy or a statement that the policy is located in the packaging material. The packaging material must disclose the value of the card in minutes or the domestic rate per minute of the card, all surcharges and fees applicable to the use of the domestic service, all applicable rates for international calls and all applicable surcharges and fees for international calls.

Finally, there must be a disclosure statement that all rates and fees for international calls are available through a toll-free number and a statement disclosing whether international rates vary from domestic rates.

Madigan says an investigation into deceptive practices by calling card companies conducted by her office and the Cook County State's Attorney's office revealed that consumers -- many in minority neighborhoods -- are often the victims of misleading calling card information.

Among other problems with pre-paid calling cards, the investigation found that some cards were making disclosures and/or giving directions only in English, charging outrageous amounts for maintenance fees, surcharges and service fees, penalizing card users for calling from a pay phone and not providing the same number of minutes advertised on the card or in the stores.

The Attorney General offered the following tips to help protect consumers:

• Call the 1-800 number on the card before purchasing to see if it works and to get information about rates, charges, expiration dates and fees.
• Do not take the ad at the store at face value. Although it may indicate a certain number of minutes available, rates may vary at any time depending on when and where the call is made.
• Call the 1-800 number on the card to verify minutes available.
• Consumers should start out buying the least expensive card they can find. If it works, stick with it. If not, ask friends and family members about cards they have used.
• Check the card for disclosures. If there are no disclosures on the actual card or near the card at the store, the consumer might want to find another card. All cards have surcharges and fees; therefore, a card that discloses nothing is questionable.

Illinois consumers who have been victimized by pre-paid calling card providers can call the Consumer Fraud Hotline at 1-800-386-5438. Operators speak both English and Spanish.

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