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Prepaid Phone Cards Under Scrutiny as Complaints Increase

Commerce: State regulators are examining reports that the devices often deliver less talk time than advertised. Poor and immigrant communities are most affected.


People who use prepaid phone cards to keep in touch with relatives and friends in other counties are complaining that the discount plans often provide less calling time than promised.

The cards have become increasingly popular--especially in immigrant communities--because they offer long-distance phone rates at about half the price of a regular call from one's home phone.

The state's Public Utilities Commission and several consumer groups believe some companies are deliberately cheating customers by promising more minutes of phone service than the cards actually offer.

"I've called and been cut off after barely saying 'hello,' " said Patricia Mendez of Santa Ana, who uses the cards to call her native Guatemala with varied success. "You have to wonder how they measure the time."

The PUC received dozens of complaints last year from disgruntled customers, but some lawmakers, such as Assemblyman Lou Correa (D-Anaheim), say the problem is much more pervasive and that immigrants simply don't make formal complaints.

A law that went into effect in 1999 was designed to crack down on phone card companies by tightening rules and giving the PUC the right to fine companies that practiced deceptive advertising.

But Correa is considering new legislation that would further regulate the industry, by requiring companies to post larger bonds with the state and offering improved 24-hour customer service.

Even some in the phone-card industry say more aggressive government action is needed to weed out unscrupulous operators.

"We are very concerned there is not enough punishment," said Howard Segermark, executive director of the International Telecard Assn., which represents companies that sell prepaid phone cards. "We know there are problems out there."

Federal regulators, who have helped states such as New York combat misleading advertising for phone cards, concur. "As far as regulatory agencies go, not too much is being done," said Carole Paynter, an attorney with the Federal Trade Commission. "It is something we still need to look at."

Complicating matters is the fact that, even when the phone cards fail to deliver the amount of air time advertised, they are still often cheaper than a regular call. As a result, many consumers put up with problems, learning which of the dozens of brand names they can trust.

"It's sort of playing the lottery. Sometimes you win, sometimes you don't," said Alicia Cortez, who sells cards at International Travel and Auto Insurance in Santa Ana. "The fact is, a lot of people don't speak English and they don't have the custom of complaining."

Francisco Guiterrez, a 32-year-old construction worker from Jalisco, Mexico, buys phone cards because they get him connected to his hometown for 12 cents a minute, compared with 30 cents to $1 a minute for a regular call from home.

Recently, he called his mother with a card that promised 30 minutes of talk time. But he said the card was inoperable after a few minutes.

Martin Loera, 25, said he repeatedly calls the 800 number on the back of the cards to demand more time from the companies. Often, they oblige.

"You do have to fight a bit to get what you are owed. It's not something that is given," he said. "It's sort of crazy that we let ourselves get trapped in this system."

The prepaid cards come in denominations as low as $1 and as high as $20.

To use one, a caller dials a toll-free number on the card, enters the personal identification number provided with the card and then dials the number to be reached. Consumers learn their minute balances from a computerized voice system.

Up to now, the state has never fined providers of prepaid phone cards or filed criminal charges against them. But the PUC said it is examining reported problems with several companies.

The state attorney general's office said it is also looking into the matter and urged customers with problems to contact officials.

"We are concerned about the false and misleading advertising . . . [and] inadequate disclosures to the consumer about how much the calls will really cost," said Sandra Michioku, a spokeswoman for the office.

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