Calling Home

Surcharges, Extra Fees Add Up

Posted September 26, 2008 at 6:30pm

A bill that would make it easier for the federal government to go after companies that make fraudulent or deceptive claims on consumer calling cards quietly passed the House on suspension of the rules last week.

The bill’s unanimous passage came despite opposition from the powerful U.S. Telecom Association, which represents some of the biggest industry players, including AT&T and Verizon.

Now the bill’s opponents and proponents alike have turned their attention to the Senate, which is considering a similar bill sponsored by Sen. Bill Nelson (D-Fla.).

At issue are calling cards, which typically cost $2 or $5 and are marketed primarily to immigrants — who make international calls back to their home countries — and to military personnel.

Critics say many of the card companies, often small, obscure telecommunications firms, frequently misrepresent the number of minutes provided and fail to explain the fees and charges on their cards, which are frequently sold at neighborhood bodegas in poor and working-class neighborhoods.

All sides agree that companies like AT&T, Verizon and Sprint are not the ones engaging in such practices in what is estimated to be a $4 billion industry.

But they are still opposed to the bill because they say it gives the Federal Trade Commission “duplicative” authority over their business, which is already regulated by the Federal Communications Commission.

A spokeswoman for AT&T did not return a call seeking comment, while a Verizon spokesman referred comment to the U.S. Telecom Association.

USTA’s Tom Amontree said his group supports the bill’s objectives. “But we believe there are unintended consequences that will end up hurting consumers,” he explained. “As it moves forward, we will make our concerns known to the Senate in an attempt to resolve them.”

The bill’s House sponsor, Rep. Eliot Engel (D-N.Y.), said the Senate should promptly pass the legislation.

“The measure is designed to protect our consumers, specifically our poorest ones, who are most often targets of this type of fraud,” Engel said in a statement.

Engel has said that some calling cards deduct minutes even if the call is not connected, while other cards cut off the call after a few minutes so the consumer must pay a connection charge. Engel said some cards advertise “no connection fees,” but instead quietly charge a hang-up fee. “These fees take considerable money out of consumers’ pockets every time they pick up the phone,” he said.

Consumer groups and Hispanic advocates, who have worked for passage of the bill, say they will now focus on the Senate.

“We’ve been trying to highlight this issue for over a year now,” said Gus West, president and board chairman of the Hispanic Institute.

Like Engel, West said his group has found that some of the calling cards deliver half the minutes they promise, while some cards don’t work at all. Others misrepresent hidden fees.

“The worst offenders are ones you haven’t heard of, not AT&T, Verizon or Sprint. These are smaller companies that are in this area of prepaid international calling cards,” he said.

“The FTC has started to take some action against some of the companies,” West said. But the bill would give the agency more jurisdiction over these situations.

Sally Greenberg, president of the National Consumer League, favors the Senate version.

“There’s an enforcement problem,” she said. “This legislation would help because it would give the Federal Trade Commission greater authority. It expands their jurisdiction to go after fraudulent prepaid calling cards.”

And that’s what scares the big telecom companies.

In a Sept. 22 letter, USTA President Walter McCormick Jr. wrote to Members on the House Energy and Commerce Committee to state his concerns, noting that “the bill could subject telecom providers to duplicative and inconsistent regulation and enforcement from two different federal agencies and a multitude of state and local authorities.”

Sources said USTA’s opposition has raised the ire of Engel and others who support the bill and typically support USTA’s agenda as well.

“We’re trying to get their thoughts in the next day or so to see where they are,” said a Senate staffer working on the bill.