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Hanging Up on Calling Card Scams

As printed in La Prensa San Diego; December 12, 2008

Vince Vasquez, Senior Policy Analyst

Friday, December 12, 2008

This holiday season, many Latino families will be keeping in touch with long distance telephone calls, often through prepaid calling cards as the preferred method of choice. Thankfully, avoiding calling card fraud will be easier with a new consumer law on the books, helping more Californians safely stay in contact with their loved ones.

Signed by Governor Schwarzenegger this fall, Assembly Bill 2885 extends the enforcement of existing calling card disclosure laws to the state utility agency, the California Public Utilities Commission. Previously, only the State Attorney General's office and local District Attorneys could pursue calling card consumer complaints, but with so many more grievous criminal cases to prosecute, consumer-related legal action has been a low priority and a scarce sight in the court rooms. This hurt low-income households, immigrants, and Latinos, who many times do not qualify for traditional telephone service, and must sift through colorful displays of prepaid cards at supermarkets and convenience stores, taking a gamble on the quality of service of the provider they select, a problematic situation.

Too often, prepaid card companies engage in "bait and switch" practices that slash the minutes advertised for phone calls, such as destination surcharges, periodic maintenance fees, and call termination fees. More worrisome, many of the cards are marketed and printed only in English, leaving Spanish-speaking consumers unaware of the terms and restrictions the cards contain. According a study released by the non-profit Hispanic Institute in 2007, calling cards on average only deliver 60% of the calling time they advertise, leaving Latino consumers to lose up to $1 million per day from card fraud. Though prepaid calling cards are a $4 billion industry nationwide, only about 11 states have laws protecting consumers from deceptive companies, including California, which has some of the toughest rules in the country.

State law requires card companies and vendors to disclose at the point of sale a laundry list of terms and restrictions, including all rate terms, available fees, and any refund and exchange policies. If Spanish or any other language other than English is used to advertise and promote the calling cards, the full disclosure must also be available to consumers in that language. Live operators are required to answer consumer questions and receive their complaints, and be available through a toll-free number 24 hours a day, seven days a week. With new enforcement power for the California Public Utilities Commission, these rules will have more investigators actively looking into consumer complaints every day, but there is still more that can be done to change the costly status quo.

With so much distrust festering throughout the state, legitimate calling card companies should take this opportunity to clean up their industry and sign a multi-point agreement, voluntarily developing high standards for consumer service and corporate transparency they will adhere to, and expect newcomers to adopt as well. This has worked well in the past. In order to help parents and families make good decisions at music stores, in the 1980’s the Recording Industry Association of America created the voluntary “Parental Advisory Label” program, which developed new standards to identify musical songs with explicit content, and successfully prompted music artists to create more family-friendly versions of songs. Consumer advocacy groups should consider developing consumer guides to calling cards, rating their service in an easy-to-read format that is culturally competent. Unique hologram stickers or other verification systems can be used to identify high standard cards that sell exactly what they advertise, helping Latinos avoid deceptive cards.

Consumers who wish to report complaints about calling card scams are encouraged to call the California Public Utilities Commission's Telecommunications Fraud hotline at 1-800-649-7570. For those worried about buying a deceptive calling card, a safer way to make long distance calls is to purchase a prepaid cell phone service, such as Cricket Wireless, which does not require contracts and has convenient storefronts in most major Latino neighborhoods.

More public awareness must be brought to target and shut down deceptive companies that prey on Latinos; prepaid calling card fraud is a serious crime that's hurting working families in San Diego and throughout the state. If state and local lawmakers refuse to rest on their laurels, there's hope that one day phone calls can be safe for every consumer.