In light of the slew of investigations, class action lawsuits, and enforcement actions over the past two years, ensuring compliance with applicable “calling card” marketing, disclosure, and disclaimer laws, regulations, and consumer protection policies has become a critical requirement for any business operating in the prepaid telecommunications services industry today.  Unclear marketing material, inadequate disclosure of rates, terms and conditions and failure to ensure reasonable compliance of other “back of card” disclaimers can result in unwanted attention and potentially debilitating liabilities.  If you‘ve been in the business long enough, you understand that today –more so than at any time in history– the prepaid industry is under the regulatory microscope.

For example, during this past year alone, the Federal Trade Commission (“FTC”) initiated a series of enforcement actions against distributors for engaging in false and misleading advertising of available minutes.  Several of the targeted providers have since agreed to pay between $1.3 and $2.25 million to settle the FTC‘s claims of misrepresentation and other violations of the FTC Act.  And it‘s not just the federal government.  Several states have initiated enforcement actions against service providers and distributors for violations of state consumer protection laws.  Just this past May, California-based calling card provider, Total Call International, agreed to forego $1.5 million in profits and pay $300,000 in penalties to resolve a complaint brought by the California Public Utilities Commission and state Attorney General.

Marketing Material/Disclosure Compliance Audit Service

Our firm can help your company feel more confident about its compliance with the disparate and widely diverse universe of both state and federal regulations, laws, and policies mandating calling card disclosures, disclaimers, and governing other aspects of marketing and service delivery.  For fees ranging from an average of $1,000 to $2,500, depending on each client‘s particular needs, our firm now offers Compliance Audits.  The typical audit consists of three steps:

Step 1: Review of existing or proposed disclosures/disclaimers and associated marketing materials;

Step 2: Analysis to determine extent of compliance / non-compliance with FTC precedent and select state laws, regulations and policies; and

Step 3: Delivery of Audit Report identifying troublesome areas requiring attention, including citations to the source of our concerns for management‘s consideration of risk; our Audit Reports may even contain suggested changes.

For the above-quoted fee range of between $1,000 and $2,500, our firm is generally able to offer one of the following options:

Option 1:  Compliance review & audit targeting up to five (5) states specifically selected by client (generally states in which your products are actively and widely marketed); and/or

Option 2:  Compliance review & audit of your company‘s compliance with a handful of representative sample states (including the largest markets and those states aggressively enforcing consumer protection laws)[1]

At the conclusion of the Compliance Audit, our firm will provide you with an Audit Report which will either include or facilitate your development of disclosure/disclaimer language and marketing material that our firm confirms as compliant with the baseline requirements of the FTC and surveyed states.

As long as your company‘s actual practices conform to the guidance set forth in our Audit Report, the firm will render a favorable opinion regarding compliance with relevant consumer protection laws, regulations, and policies.  Note, however, that no audit can provide absolute guarantees.  Because the typical audit will “survey” select jurisdictions, barring a 50+ state and FTC review, we cannot guarantee that the approved language is 100% compliant in every jurisdiction.  Nonetheless, having a Compliance Audit conducted will provide management with greater assurances that neither federal nor state enforcement agencies (or class action plaintiff‘s attorneys) will pick your company‘s products out of a lineup for unwanted scrutiny.

Any clients who may be interested in securing the firm‘s auditing services to ensure compliance with state and federal PPCC rules and regulations should contact Charles H. Helein at chh@commlawgroup.com or (703) 714-1300.

[1] Due to the expansiveness of a “universal” Compliance Audit, which requires analysis and review of all fifty-states and the FTC, pricing for more expansive audits is conducted on an individual case basis.