by Joseph Kenny | 01/16/10

If the Federal Trade Commission (FTC) has its way, consumers will benefit from new legislation in the works that will end deceptive marketing practices related to prepaid phone cards. The FTC recently testified in front of the U.S. House Subcommittee on Commerce, Trade, and Consumer Protection of the Committee on Energy and Commerce. The purpose of the testimony was to explain how stronger legislation stopping deceptive marketing practices, utilized to sell prepaid phone cards, would better protect consumers.

The problem with the cards as advertised is that consumers buying the prepaid phone cards are discovering they are not getting the call time the card advertises. In some cases the cards only provided half of the advertised minutes.

The Federal Trade Commission reported to the US House Subcommittee that it had taken two major prepaid calling card distributors to court. The FTC won and the judgments against the calling card companies totaled $3.5 million. In addition the companies were order to end deceptive practices and to only advertise the actual minutes the consumer will be purchasing when buying the phone card. A third requirement of the judgment is the implementation of compliance and monitoring program.

There is a third case currently in progress that accuses a different company of using the same deceptive practices. The case has not concluded yet, but like the other two companies, the third company has been providing only half of the minutes on cards purchased by consumers.

Consumers can lose control of their expenses in a number of ways. Many people purchase prepaid cards as a method of expense control. Dishonest companies selling consumers cards providing only half of the minutes believed to be purchased contribute to the difficulties some consumers face balancing their household budgets during difficult economic conditions.

The FTC asked the House Subcommittee for a repeal of statutory regulations that limit the ability of the agency to pursue telecommunication providers suspected of indulging in deceptive practices. Currently, companies falling under the Communications Act are not subject to the FTC Act’s prohibition against deceptive practices.

The Federal Trade Commission also asked that the House Subcommittee pass the Prepaid Calling Card Consumer Protection Act. This Act requires the prepaid phone card distributors to provide accurate information to consumers. The Act would reverse the exemption currently in place for telecommunications companies as far as falling under FTC regulatory control. With passage of the Act, the FTC would gain the power to fine companies found to be employing deceptive marketing ploys.

For many consumers, it is difficult to understand how a prepaid phone card distributor can so blatantly mislead consumers. The Federal Trade Commission works diligently to end deceptive practices like the one just described and any other unfair business practices.

If you buy a prepaid phone card, and discover you are not able to get the minutes you thought you were buying, then it’s important to file a formal complaint with the Federal Trade Commission. Consumers need to always be on alert for misleading advertising and marketing.