Your Stock Market Darlings at Work
Business Week is continuing to take its latest tack of stock-market contrarian seriously. The magazine has published several recent articles about companies that prey on the underclass. This week's issue takes long-distance phone card sellers to task for misleading claims and bizarre fees.
Phone card companies also impose an array of "fees" on card users that reduce the value of cards by trimming 10, 20, or more minutes. Often called connection, service, or maintenance fees, these provisions sometimes are disclosed in ambiguous fine print on the back of cards, but other times aren't disclosed at all, according to a 2005 study by Julia Marlowe, associate professor emeritus of housing and consumer economics at the University of Georgia. IDT's $3 Crazy Crazy Crazy card, for example, charges a connection fee at the end of the call for every five minutes of use. The card also lists a 25% service fee, although it's not clear from the language on the card how the 25% applies. IDT says the fees are fair and vary by destination. A customer can avoid them by using all of a card's minutes for one conversation, the company says.
Regulation of phone cards has been light. Only 11 states, including California, Connecticut, Florida, and Illinois, have laws on calling cards. Other states rely on generic consumer protection regulations, but those are rarely applied to cards. The Federal Communications Commission has jurisdiction but hasn't used it much. The staff of the Federal Trade Commission is watching the calling card industry, suggesting stiffer enforcement could come soon. "We have been speaking to Hispanics across the country, and allegations about deceptive practices in the prepaid calling card industry keep coming up," says Lisa Hone, the FTC's assistant director of marketing practices.
But don't hold your breath waiting for the Bush administration's purported watchdog to do anything. Indeed, IDT seems to be among the more responsible of phone card providers—it has successfully sued competitors for promising minutes of calling that would be impossible to realize.
As the article correctly notes, many users of these prepaid cards are illegal immigrants who are singularly unable in many cases to take any legal action against the predators who are promising goods that they will never deliver.
Labels: Business Week, phone cards, stupid corporate tricks
