Study finds rampant fraud in calling-card industry

 

The average calling card delivers only 60 percent of the minutes promised, according to a new study by the Hispanic Institute in Washington, D.C. The study claims there is rampant fraud in the pre-paid calling-card industry.

“American consumers lose up to a million dollars a day because of fraudulent phone cards,” explained Gus West, president of the Hispanic Institute. “Our findings quantify the unfortunately widespread nature of these scams.”

Prepaid phone cards have grown into a $4 billion industry, responsible for 11 billion calls in 2004. Many calling-card firms employ scams that involve deceptive advertising, according to West.

 

The cards publicize a certain number of minutes but deliver far fewer. West says that Hispanics are hit particularly hard.

Pre-paid phone cards have emerged as a cost-effective option for those calling abroad. They are especially popular among recent immigrants who use calling cards to keep in touch with friends and family abroad.

“Fraudulent companies need to get the message that we will not stand for this sort of double-dealing,” West said. “Armed with the findings of our new study, I’m hopeful that we’ll be able to affect change on this important consumer issue.”

Dropped calls, poor listening quality and post-dial delays of up to 50 seconds were hallmarks of the majority of cards tested.

 

Fifteen cards did allow for the caller to utilize the entire time balance.

Here are additional findings listed in the study:

  Only one-third of the 45 cards tested delivered the full call-time promised.

  Seven of the 45 cards (15.6 percent) tested didn’t work at all.

  Eight of the cards tested had call completion rates of 50 percent or less. Three cards provided less than 20 percent of the minutes promised.

The Hispanic Institute, in conjunction with independent telecommunications expert Network Analytics, tested 45 different international pre-paid calling cards for efficacy and value to see whether they lived up to the promises of their advertising.

 

Two lawsuits relating to calling card fraud were settled Nov. 29. IDT Corp., provider for telecommunications services, and Union Telecard Alliance, LLC, have reached a private settlement with CVT Prepaid Solutions, Inc. IDT sued the company and 10 other businesses in March, 2007, alleging fraud and deception.  CVT agreed to deliver 100 percent of its minutes to consumers.

IDT claimed it was losing more than $1 million in revenue daily, which reduced its market share and net income.

The other companies in the lawsuit, which is still being pursued in federal court in Newark, N.J., include Locus Telecommunications, Inc., Dollar Phone Corp., and Epana Networks, Inc.