On May 4, 2009, California‘s Attorney General (“AG”) and the California Public Utilities Commission (“CPUC”) jointly filed a complaint in San Francisco County against Total Call International (“TCI”), a prepaid calling card (“PPCC”) carrier/distributor. The complaint alleged violations of the state‘s disclosure requirements applicable to the marketing and sale of PPCCs in California. Thereafter, the parties negotiated a stipulated judgment by which TCI agreed to pay $450,000, amend certain disclosures and marketing statements, and refrain from further violations without admitting liability. On May 8, 2009, the court issued an order adopting the stipulated judgment.
California revised its Business and Professional Code, effective January 1, 2009. The revisions incorporated stringent disclosure requirements for the advertisement and sale of PPCCs. The original law required PPCC providers to legibly print on the card or packaging the value and expiration date of the card and all ancillary charges as well as the company name, contact number and its policies for refunds and recharging. Additionally, voice prompts disclosing the number of minutes available to the caller must now precede all calls. Further, offering cards for sale without the required disclosures now constitutes a separate offense.
In their complaint against TCI, the California AG and CPUC alleged that TCI failed to clearly and conspicuously disclose all charges and conditions in advertisements, neglected to legibly print the value of the card and all ancillary charges on the card or packaging, provided fewer minutes than the number stated, and failed to provide compliant voice prompts. In addition, the complaint charged TCI with engaging in unfair competition for selling its cards “with the intent not to sell them as advertised” and by overstating the quantity of calling time available. The complaint requested a permanent injunction from future violations as well as various civil penalties.
Ultimately, the court adopted an offer of stipulated judgment agreed upon by the parties. The order permanently enjoined TCI from further violations of California‘s PPC disclosure requirements. It further required TCI to pay $450,000 – $150,000 each in penalties to the AG and the CPUC and $150,000 in investigative costs to the AG. TCI also agreed to remove certain “real-time rate surcharges” (fixed percentage mark-ups to the applicable per-minute rate) from select PPCCs.
Client Advisory
Clients are advised to pay careful attention to state disclosure requirements for the advertisement and sale of PPCCs. Providers operating in California should be especially attentive to its new requirements as the California AG publicly announced that it is presently investigating other providers for similar violations.
In California, providers must make clear and conspicuous disclosures in PPCC advertisements, on cards or packaging, and via voice prompts. In addition to these disclosures, the California law also makes demands of customer service representatives and separately penalizes charging rates or otherwise conducting business in a manner contrary to the stated disclosures.
Likewise, many other states recently strengthened existing requirements or adopted new rules pertaining to PPCC sales, marketing, and consumer protection. Heightened enforcement in California and other states may follow, continuing a trend which began two years ago. Clients should fully assess their compliance with these new laws and seek legal guidance, as necessary.
Clients who have any further questions or concerns about this Advisory or if you would like our firm to conduct an audit of your company‘s compliance with PPCC marketing, disclosure, and consumer protection regulations, please contact Jonathan Marashlian at: jsm@commlawgroup.com or 703-714-1313.
