Phone card company fined $140K for misleading customers

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A company has been fined $140,000 for selling prepaid phone cards which gave callers far less talk time than they purported to.

Compass Communications Limited pleaded guilty to five charges laid by the Commerce Commission of breaching the Fair Trading Act through its marketing of five prepaid phone cards between November 2008 and June 2009. The cards were WorldPhone, Talk 'N' Save, Go Call, V8 and Meihua.

Advertisements for the cards gave particular emphasis to 'per minute' rates to selected destinations, while fees, surcharges and conditions were written in small fonts or placed in obscure positions.

"In practice a consumer could only get the advertised number of minutes by making one continuous phone call until all credit was used, for example a single 576 minute call to the United Kingdom using a WorldPhone calling card," Commerce Commission competition branch manager Stuart Wallace said.

"The fees and conditions were also inadequately disclosed in relation to the prominently displayed per minute rates, or available number of minutes. For example some calling cards had a connection fee of up to 25 cents plus GST which applied to each call, while others had a daily service fee of 20 cents plus GST which applied once the card was first used."

Mr Wallace said the cards were often bought by migrants and international students who were unlikely to speak English, and were less likely to read the fine print.

"Given the number of phone cards sold by Compass, their extensive distribution and the likelihood of direct losses, there was potential for real detriment to consumers."

This is the second recent successful prosecution of a phone card company by the Commerce Commission. In September 2011 Tel.Pacific New Zealand Ltd was fined $100,000 after pleading guilty to similar charges under the Fair Trading Act.

Compass Communications Limited could not immediately be reached for comment.