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Aug 15, 2007

Legal Line

Edward A. Maldonado

The issue in this Legal Line issue came to my attention in May 2007 from a calling card consumer. At first, it was a little uncomfortable to address the issue but I felt it important to reply. Most of the time, I do not publish these types of questions and simply answer them with a quick e-mail directing the person to the right resource. With recent legal developments in the industry, I believe this issue is timely and on point. Therefore, I submit it for reflection by those on both sides of this issue.- Good Luck and Success in the IndustryDear Mr. Maldonado:I noticed your articles online and wondered if you knew about consumer class action claims for prepaid calling cards. I am writing on behalf of my parents who use calling cards to Mexico. They are continually getting ripped-off on $10 and $5 dollar cards. They are on a fixed income so this is more than just an annoyance. We have read about several lawsuits regarding prepaid calling cards by consumers, but the attorneys advertising these cases seem to be more experienced in general consumer issues, not calling cards. These attorneys have posted information on their website but I am not really sure if the small amount of money that my parents get shorted on the cards is worth the trouble. Is there another way to address this problem?NinaDear Nina:Thank you for your submission. I generally represent the calling card companies so my knowledge comes from that perspective. What I can tell you is that there are a number of alternatives that your parents have before rushing into a class action lawsuit. Regulated calling card providers are required by law to respond to formal complaints made to state agencies, particularly the state utility commissions, by consumers. There are both procedures and policies for such complaints in every state. Usually the complaint is investigated by the calling card company and a credit or refund is given if a problem actually occurred. Many times, informal complaints to the prepaid calling card company’s customer service number result in the same refund or credit being given to the consumer. It really depends on what happened. Often the calling card company just needs to be given the chance to respond to service issues. The problem that the calling card industry has faced is the lack of informal complaints through their customer service lines. Unhappy consumers tend to jump the gun and immediately call state utility commissions in the event of any problems with the card or outages of service. Some consumers, particularly those consumers that are undocumented aliens, do the reverse and complain to retailers about the problem with the cards and do nothing further. This leaves the regulated calling card provider with little feedback on which to follow-up. The problem consumers have faced (aside from charges) is that some calling card providers do not sufficiently support and train their customer service personnel, or depend on off-shore outsourced customer service support that is not responsive to the consumer. As in any industry, there are also those calling card providers that care little for the consumer and do not pay attention to informal complaints to their customer service lines. These are the providers that usually end-up with formal complaints in the state utility commissions. While I understand the reasons consumers consider civil class action lawsuits to resolve problems they face with calling card services, I am not entirely certain that class action lawsuits yield the results that the consumer is anticipating by participating in such a lawsuit. There are a number of things that can happen to consumers that participate, or become part of a class action, that do not benefit them personally. Cases can be settled across an entire class that equate to far less than the actual loss the consumer experienced. In past cases involving telephone charges, the settlement often involved a credit to the consumer. This is the same net effect that the consumer would have had if they had sought remedy through their state utility commission. The truth is, many times the only ones that seem to benefit from class action lawsuits are the attorneys, who recover their fees statutorily or by contingency off the gross amount of settlement.Some things to consider before participating in a class action lawsuit are:1.You will lose your right to file an individual lawsuit over your actual damages. You are now part of a group, and once that case is settled, it applies to all future claims, including yours. This is true even when you have not voluntarily participated in the lawsuit. If you fit the definition of the class represented by the lawsuit you automatically become part of it.2.You can be liable for settlement costs, which may reduce the consumers final settlement, or implicate an out of pocket expense with the attorney for the class.3.You do need to keep on top of the progress of the case and your participation in it. Many class action lawsuits with a broad class have “opt-in” and “opt-out” requirements. If you fail to respond properly, you can lose your entitlement to any judgment or settlement. By no means are class action lawsuits an automatic resolution for all consumers. I think you need to personally consult a civil attorney who specializes in this area. They can tell you what may be the best course in your particular case. I personally do not practice consumer class action claims and can only give you my perspective from the industry side. I do, however, understand that although we are a litigious society today, there is a valuable purpose to civil class action lawsuits. I am just not sure if consumers of prepaid calling cards will be best served by this legal recourse. I am forwarding you the number to the California Public Service Commission (the proper state utility commission for you) in this e-mail so that you have as many alternatives as possible in this decision. I also encourage you to call the customer service lines of the cards that you have experienced problems with. For both regulated calling card companies and consumers alike, it really boils down to communication and customer service. Good Luck to You Nina.Attorney Edward A. Maldonado is President of the Regnum Group, Inc. and the Maldonado Group. He can be reached ateam@maldonado-group.com.
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