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Apr 15, 2005

The Legal Line

Ed Maldonado

Dear Legal Line:
I distribute calling cards in several major metropolitan markets in northeast. I have one card that has caused me some concern over the past two months. It’s a super cheap Mexico and South America card that lists its carrier as an ambiguous acronym (like “ABC” instead of its real name). Their customer service is handled by another company when you call them but they do support the cards for credits and the like under the carrier name listed.

The card was referred to me by a retailer out of Boston. I have known him for years and he highly recommended as profitable for resale by retailers and distributors alike. I do trust him. The card hasn’t failed and still is selling quite well.

The problem is that I feel like it is the calm before the storm. I checked with other distributors on the bulletin board no one really seemed to know anything about this card. I wonder if I should be cutting my losses early or keep selling it. How can I be sure that who I am dealing with is who they say they are?

Distributor On-the-Radar

Dear DOTR,
Let me understand this. Your question is that you are selling a card of which you really do not know who the carrier is. The card, however, is running well and consumers are getting response if they call customer service for issues related to the card. So, there is no controversy but you feel there is potential because you don’t know whom your dealing with at the end of the day.

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In general, most states’ utility commissions require that prepaid providers disclose their actual name, or any D/B/A or trade name used, on their applications for state certification as a long distance prepaid provider. The idea is that all possible variations of their name will be listed on their state certification. The States keep these name on lists, available to the public either online or in paper form to identify all certified carriers. This is generally the way you can cross-reference and identify prepaid carriers, provided that they are actually certified in the states which you are selling.

I assume by virtue of the way you signed your e-mail that you suspect that these guys are “off-the-radar” and have little or no state certification to provide prepaid calling cards. Should this be the case, you will need to be more creative. First, check your particular state’s Office of the Secretary of State, Division of Corporations, to see if the acronym is a trade or service mark or a d/b/a at the state level. Next, check the USPO to see if the carrier is simply using a federal service mark. Finally, check all paperwork in the stream of commerce that is related to the cards. For example, if you are billed by invoice – who appears on the invoice as the payee. Ask yourself are they a carrier or a reseller and cross reference the acronym under their corporate names as a trade or service mark registered at the state or federal level.

If these efforts yield no results, there is one last way that you can confirm them from independent public records. This is by virtue of Section 214 Authority. These records are available online and can be accessed through the FCC’s website. The reality about this whole issue is that both state and federal regulation require that carriers and providers utilize the name that appears on any certification or licensure. Most carriers do license and certify themselves, but many do not. Their arguments for not doing so range from being a pure consumer prepaid VoIP provider exempt from all regulation to it being a cost prohibitive process. These arguments really have little to no merit.

Being “off-the-radar” is usually for the purpose of being able to either “disappear” or bankrupt themselves without a line of creditors, distributors, or consumers on their tail. This usually is accompanied by indications of bad service – consumer and retailer returns, complaints to utility commissions, sweeping of cards at illegal and excessive rates and etc. The fact that your anonymous card is selling well and being supported well by customer service leads me to believe that the provider may be using a trade name or other registered fictitious name. However, you should check them out thoroughly.

In general, it is advisable to ask new card providers for their certified name and the states they are authorized to provide services in before you distribute on a large scale. A good way to do this is to work under a contract wherein they warrant, or promise, that they are who they say, and have all regulatory authorizations to do so. In saying this, I recognize that most distribution deals are done more on a handshake than a contract. Therefore, representations made via e-mail or correspondence may also be good evidence of who is who should things go bad. Never trust simply an e-mail address or letterhead since these items can be forged easily and frequently. Using common sense is always the best defense to getting burned in the prepaid marketplace and getting a confirmable carrier name is a must.

It would also be advisable to consult your attorney immediately if this cards starts to get shaky in service or customer service. Since it is unclear if anything beyond a potential problem exists here, it would be wise to be weary of any sudden or dramatic changes in business. Should this occur you may have legal recourse from both a civil action or administrative proceedings depending on the way it actually occurs and how much time you have to respond. So definitely keep those topics in mind when you speak with your attorney. I hope this dose of preventative medicine helps.

Good Luck and Success in the Industry.

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