FCC Slams Calling Card Provider Over Marketing Practices

By J. Bradford Currier and Marty Stern

Prepaid calling card services will need to pay careful attention to their marketing practices or face hefty fines following a recent Notice of Apparent Liability for Forfeiture released by the Federal Communications Commission proposing a $5 million forfeiture penalty on a prepaid calling card provider. The NAL alleges that a calling card provider marketed low-cost cards to immigrants with claims that customers could make “hundreds of minutes” of calls to their native countries, while failing to clearly disclose multiple fees and surcharges that reduced the available minutes to a fraction of what was advertised. Following on the heels of several similar cases in 2011 with significant forfeiture penalties, the FCC is putting calling card providers on notice that potentially deceptive marketing practices are being subject to increased scrutiny under a provision of the Communications Act that prohibits unjust and unreasonable sales practices.

The FCC’s marketing rules require calling card services to provide a “clear and conspicuous disclosure on how to calculate the total cost of a call.” Here, in an investigation, the FCC’s Enforcement Bureau found that the only information regarding the application of fees and surcharges for the calling cards was contained in very small font at the bottom of a poster, failing to convey sufficient rate information in violation of prior FCC rulings and deceptive marketing policies established by the FCC and the Federal Trade Commission.

As for the amount of the proposed forfeiture penalty, the FCC found that while each calling card sold constituted a separate violation, applying the base forfeiture amount of $40,000 per violation that it had previously used in telemarketing actions would result in an excessive penalty. Instead, following its earlier cases, the NAL determined that a $5 million dollar penalty appropriately reflected the “the nature, circumstances, extent, and gravity of the violation” and would ensure that calling card companies do not treat such penalties as the “cost of doing business.” The calling card company now has thirty days to pay the proposed forfeiture or file a response seeking a reduction or cancellation of the penalty.

Copyright © 2016, K&L Gates LLP. All Rights Reserved.