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Cheap Phone Cards Cost Callers Millions

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By LAURA WIDES-MUNOZ, The Associated Press

Published: November 10, 2007

MIAMI - They can be seen hanging behind the counter at the minimart, those brightly colored phone cards for calling Latin America, Africa and Asia. Often they are the only reliable way for immigrants to stay in touch with their families.

But many buyers of these cards are being ripped off to the tune of millions of dollars a year.

Some cards fail to deliver the promised minutes. Others tack on confusing fees that may not be listed in the microscopic print on the back of the card. Still others round up each call to the nearest three-minute mark.

"Sometimes they give you all the minutes. Sometimes they don't. Then you have to switch to a new card," said Augusto Revolorio, a Miami Beach grocery stocker. He buys the $2 or $5 cards regularly to call his mother and four brothers in Guatemala. "It costs me more to complain on the phone and be late for work, so I just rip up the card and buy a new one."

A 2004 study led by University of Georgia economics professor emeritus Julia Marlowe found that the cost-per-minute rates for prepaid calling cards were on average 87 percent higher than those advertised.

But because many immigrants like Revolorio don't have time or are afraid to go to authorities to complain, and the money they lose per card is small, little has been done to crack down.

"Every time I check, the telecommunications industry is a highly regulated industry. This one they don't want to regulate," said Gus West, head of the nonprofit Washington-based Hispanic Institute.

That's beginning to change. In the past year, attorneys general in Florida, California and several other states have begun to take a closer look at the phone card industry, as has the Federal Trade Commission. In October, Rep. Eliot Engel, D-N.Y., introduced legislation to regulate the business.

The push comes in part from an unlikely source - communications giant IDT Corp.

The Newark, N.J., company settled its own decade-long class-action lawsuit in January over allegations it failed to adequately disclose its charges. Now it is leading the call for regulation at the state and federal level.

"What we'd like to see is an honest industry, where everyone is held to the same standard that we hold for ourselves," IDT head Jim Courter said.

The most popular cards among immigrants - and the ones least likely to deliver promised minutes - are those offering supercheap rates to countries such as Mexico, Guatemala, Haiti and India.

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