Senate Commerce Wants Prepaid Calling Card Reforms
“Skulduggery” in the prepaid calling card business must be stamped out, Sen. Bill Nelson, D-Fla., said at a hearing he chaired Wednesday on his reform bill (S-2998). Consumer advocates and Federal Trade Commission Chairman William Kovacic agreed that stronger enforcement and better consumer education could keep many low-income consumers from unwittingly buying cards that don’t deliver promised services. Kovacic also made a plug for repealing the common carrier exemption from FTC enforcement, which he said blocks his commission from going after all bad actors.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The FTC has “extensive expertise” with advertising, marketing, billing and collection, “areas in which significant problems have emerged in the telecommunications industry,” Kovacic said. That agency has “powerful procedural and remedial tools” for addressing the problems if it had the power to use them. But current regulations force “a piecemeal approach” by the FTC in fighting fraud, he said. Nelson acknowledged that the FTC request, made before in other venues, is “controversial.” He didn’t take a position.
Nelson has asked the committee to mark up the bill, but no markup session has been set up, an aide said. Several issues are on the committee agenda, including a hearing next week on broadband, a look the following week at progress with the digital TV transition and possible hearings, not yet scheduled, on wireless industry consumer protection and online behavioral advertising, industry sources and Hill aides said. The House Commerce Consumer Protection subcommittee plans a hearing next week on prepaid calling cards, according to the latest committee schedule.
S-2998 asks the FTC to write comprehensive rules that require prepaid calling card providers and distributors to disclose rates and fees at point of sale. Providers selling cards in languages other than English would have to disclose their rates and fees in those languages. “To date … there has been no effort to impose uniform, national consumer protection and disclosure requirements on this industry,” Nelson said. The bill would authorize the FTC, state attorneys general and state consumer protection officials to sue miscreants in federal court. The bill would preserve state consumer protection rules such as registration and bonding requirements.
Rep. Eliot Engel, D-N.Y., who has sponsored a similar bill (HR-3402), endorses the Senate bill, he told Nelson. “Legislation of this kind should be a no-brainer,” Engel said. Sen. Kay Bailey Hutchison, R-Texas and acting committee ranking member, told Nelson she would co-sponsor the bill.
There are few problems with major carriers’ prepaid card plans, but the industry attracts con artists straight out of the “Sopranos,” said Sally Greenberg, executive director of the National Consumers League, citing an episode from the popular HBO series. “So telecommunications once again fails to disappoint,” said main character Tony Soprano, gleefully describing how easy it is to make money. As the script has it, fly-by-night companies buy time from carriers on credit, renege on those loans and skip town before card holders whose service is terminated can complain.
Calling-card crooks’ elusiveness poses a major challenge to law enforcement, Kovacic said. A joint federal-state task force set up last year by the FTC addressed deceptive marketing and the FTC is litigating two federal court cases against alleged perpetrators, he said. Nelson’s bill would give the commission “powerful procedural and remedial tools” for remedying problems, Kovacic said. But it raises concerns, he added: It would hold distributors liable if they sell cards that provide fewer minutes or higher rates than advertised, and it would not apply when consumers buy service when buying handsets. Holding distributors liable could place a “potentially very challenging” evidentiary burden on law enforcement in civil cases, Kovacic said. And exempting situations in which consumers buy accounts offering handsets along with prepaid services would “provide a powerful incentive for the worst actors in the prepaid calling card industry to migrate their business practices” to escape the law, he said.