Calling Card Fraud and Scams

Calling card fraud is a serious issue that is costing consumers millions of dollars per year.

The two main calling card problems that consumers experience are:

• Receive far fewer minutes than advertised
• Hidden fees drain cards of value in mysterious ways

As a result of these problems, recent studies have shown that in some cases consumers receive no more than 50% - 60% of advertised minutes. A report by the Hispanic Institute gives some specific examples of some phonecards that deliver far fewer minutes than advertised (pdf).

As you might expect, these studies have also shown that actual per minute rates can be 80% - 100% higher than advertised per minute rates. This is due to all fees and surcharges that are added onto the base rate. Our own analysis suggests that some cards may see actual per minute rates of 200% or more higher than the advertised rate - though much depends on your calling habits and the specific fees involved.

Legal Action on Calling Card Fraud

Of course, these problems don't affect all cards, but they are severe enough that several federal and state agencies have brought successful lawsuits against calling card companies.

In particular, the Attorney General in Florida settled a calling card fraud suit this year involving a total of 11 calling card companies. The Federal Trade Commission (FTC) and the Attorney's General of New Jersey and Texas have also recently pursued calling card fraud cases.

In addition, the US Congress has become active in this area, considering two bills in recent years to regulate and control calling card marketing. As of this writing, the Congress is considering a bill called the Prepaid Calling Card Consumer Protection Act of 2008, S. 2998. No word yet on whether this will pass or not.

More Problems with Cards Bought in Stores

While there is no shortage of fraudulent providers online, calling card fraud appears to be concentrated with off-brand calling cards sold in retail and convenience stores. Cards sold under recognized brand names and/or through online outlets seem to face fewer complaints.

In our opinion, a major reason for the prevalence of problems in retail stores as compared to online shops has to do in part with packaging. In retail stores, companies are very limited in the amount of information they can provide due to the small size of the cards. As well, concerns about security and shoplifting force many store owners to limit browsing and comparison shopping. As a result, unscrupulous companies have the perfect environment to over-promise and under-deliver.

Calling Card Pricing Is Very Complicated

Another issue that drives calling card fraud has to do with how complicated the pricing is. Even responsible calling card vendors use pricing mechanisms with lots of moving parts - and receive their fair share of complaints as a result.

Even when fully disclosed, no human can eyeball how all these elements will interact and what their actual per minute rates will be as compared to the advertised rates. Much depends on the calling patterns of the individual consumer.

When you put these complicated pricing schemes in the hands of shady operators, then bad things are bound to happen.

Other Calling Card Problems

Although overstated minutes and hidden fees are by far the most common calling card problems reported by consumers, there are a variety of other concerns, too:

• access codes and PINs that don’t work
• local and toll-free access numbers that are always busy
• poor call quality and bad connections
• customer service numbers that are busy or don’t work
• unfair refund and return policies for cards that don't work properly
• phone card companies that go out of business and leave you with an unusable card

How You Can Avoid Being Ripped Off

There are several things you can do to avoid being ripped off by a calling card company.

• Do your homework
• Buy online from a reputable vendor

• Buy from companies that fully disclose all rates and fees in easy to read tables
• Read the fine print and avoid companies that list fees in the Terms & Conditions or User Agreement
• Look at both the per minute rate and the extra fees & surcharges which can drive actual per minute rates up dramatically
• Understand that advertised minute totals do not include various fees and surcharges and are a best case scenario that you are unlikely to experience in your own usage
• Do some comparison shopping by looking at at least 2 vendors and at least 3 different cards
• Sketch out your calling needs / habits and buy a card that fits with those needs

Click here for more tips on how to avoid calling card fraud.

Calling card fraud is a serious issue that is costing consumers millions of dollars per year.

The two main calling card problems that consumers experience are:

• Receive far fewer minutes than advertised
• Hidden fees drain cards of value in mysterious ways

As a result of these problems, recent studies have shown that in some cases consumers receive no more than 50% - 60% of advertised minutes. A report by the Hispanic Institute gives some specific examples of some phonecards that deliver far fewer minutes than advertised (pdf).

As you might expect, these studies have also shown that actual per minute rates can be 80% - 100% higher than advertised per minute rates. This is due to all fees and surcharges that are added onto the base rate. Our own analysis suggests that some cards may see actual per minute rates of 200% or more higher than the advertised rate - though much depends on your calling habits and the specific fees involved.

Legal Action on Calling Card Fraud

Of course, these problems don't affect all cards, but they are severe enough that several federal and state agencies have brought successful lawsuits against calling card companies.

In particular, the Attorney General in Florida settled a calling card fraud suit this year involving a total of 11 calling card companies. The Federal Trade Commission (FTC) and the Attorney's General of New Jersey and Texas have also recently pursued calling card fraud cases.

In addition, the US Congress has become active in this area, considering two bills in recent years to regulate and control calling card marketing. As of this writing, the Congress is considering a bill called the Prepaid Calling Card Consumer Protection Act of 2008, S. 2998. No word yet on whether this will pass or not.

More Problems with Cards Bought in Stores

While there is no shortage of fraudulent providers online, calling card fraud appears to be concentrated with off-brand calling cards sold in retail and convenience stores. Cards sold under recognized brand names and/or through online outlets seem to face fewer complaints.

In our opinion, a major reason for the prevalence of problems in retail stores as compared to online shops has to do in part with packaging. In retail stores, companies are very limited in the amount of information they can provide due to the small size of the cards. As well, concerns about security and shoplifting force many store owners to limit browsing and comparison shopping. As a result, unscrupulous companies have the perfect environment to over-promise and under-deliver.

Calling Card Pricing Is Very Complicated

Another issue that drives calling card fraud has to do with how complicated the pricing is. Even responsible calling card vendors use pricing mechanisms with lots of moving parts - and receive their fair share of complaints as a result.

Even when fully disclosed, no human can eyeball how all these elements will interact and what their actual per minute rates will be as compared to the advertised rates. Much depends on the calling patterns of the individual consumer.

When you put these complicated pricing schemes in the hands of shady operators, then bad things are bound to happen.

Other Calling Card Problems

Although overstated minutes and hidden fees are by far the most common calling card problems reported by consumers, there are a variety of other concerns, too:

• access codes and PINs that don’t work
• local and toll-free access numbers that are always busy
• poor call quality and bad connections
• customer service numbers that are busy or don’t work
• unfair refund and return policies for cards that don't work properly
• phone card companies that go out of business and leave you with an unusable card

How You Can Avoid Being Ripped Off

There are several things you can do to avoid being ripped off by a calling card company.

• Do your homework
• Buy online from a reputable vendor

• Buy from companies that fully disclose all rates and fees in easy to read tables
• Read the fine print and avoid companies that list fees in the Terms & Conditions or User Agreement
• Look at both the per minute rate and the extra fees & surcharges which can drive actual per minute rates up dramatically
• Understand that advertised minute totals do not include various fees and surcharges and are a best case scenario that you are unlikely to experience in your own usage
• Do some comparison shopping by looking at at least 2 vendors and at least 3 different cards
• Sketch out your calling needs / habits and buy a card that fits with those needs

Click here for more tips on how to avoid calling card fraud.