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Prepaid Phone Cards

Retailer/Carrier Information

What Are Prepaid Phone Cards?

Prepaid phone cards, also known as debit cards, are used to make long distance telephone calls. Phone cards are prepaid by the purchaser, usually in cash, and offer the consumer the convenience of making long distance calls, domestically or internationally, without using cash or telephone credit cards.

Calls are made by calling a 1-800 number and entering a Personal Identification Number (PIN) printed on the back of the phone card. Customers normally purchase phone cards for specific dollar amounts.

The cards provide long distance minutes based upon the specific rates set by the carrier. As calls are made, the usable minutes are automatically deducted from the card balance, which is either recorded on the card itself or on a central computer through which the long distance calls are routed. Some cards are also re-chargeable, allowing the user to add more calling time by dialing a toll-free number or accessing a web site and using a major credit card.

Prepaid phone cards are sold at many locations, such as convenience stores, liquor stores, discount stores, supermarkets, department stores, and small markets and shops. They can also be purchased through the Internet on the World Wide Web.

If I Am A Retailer Of Prepaid Phone Cards, What Should I Know?

You will want to be familiar with California Business & Professions Code Section 17538.9 that became effective on July 1, 1999. Of special interest to Retailers is 17538.9 (3) which states:

"The company shall print legibly on the card or packaging, and the vendor shall make available in a prominent area at the point of sale of the prepaid calling card or prepaid calling services, the following information:

(A) Any surcharges or fees, including monthly fees, per-call access fees, or surcharges for the first minute of use that may be applicable to the use of the prepaid calling card or prepaid calling services within the United States.

(B) Whether there are additional or different prices, rates, or unit values applicable to international usage of the prepaid calling card or prepaid calling services.

(C) The minimum charge per call, such as a three-minute minimum charge, if any.

(D) The charge for calls that do not connect, if any.

(E) The definition of the term "unit," if applicable.

(F) The billing decrement.

(G) The name of the company.

(H) The recharge policy, if any.

(I) The refund policy, if any.

(J) The expiration policy, if any.

(K) The 24-hour customer service toll-free telephone number required in paragraph (4).

What Should I Do If I Want To Begin Marketing Prepaid Phone Cards?

Follow these steps:

As a retailer or distributor of prepaid phone cards which you buy at discount and sell for a profit to end users, you need to be aware of the requirements of California Business and Professions Code Section 17538.9 relating to the sale of prepaid phone cards.

If you wish to contract with an underlying carrier to run the prepaid phone card "platform", have control over the rates, connection fees, charges, and other fees, and intend to market your business in California, then you must register with the CPUC prior to distributing your prepaid phone cards or prepaid phone service.

If you already have a Certificate of Public Convenience and Necessity to operate as a telephone company in California, you simply need to have the prepaid phone card service tariff filed properly with the CPUC. This may only require an advice letter being filed with the CPUC.

Who Is Required To Register With The CPUC?

The California legislature approved new CPUC statutes that include language regulating the use of prepaid phone cards and service. Public Utilities Code Section 885 states "Any entity offering the services of telephone prepaid debit cards is subject to the registration requirements of Section 1013, commencing January 1, 1999, unless that entity is certificated by the commission to provide telephone service."

Resellers of prepaid telephone debit cards who are NOT subject to the registration requirement include:

1) Retailers who only provide a marketing venue for telephone prepaid debit cards.

2) Entities that only print information on telephone prepaid debit cards.

Obtaining CPUC information by mail:

Prepaid Phone Card Enforcement
Consumer Services Division
505 Van Ness Ave
San Francisco, Ca. 94102


May 11, 2009: A joint CPUC and Attorney General complaint of deceptive marketing leads to a Superior Court judgment against prepaid calling card provider Total Call International.

April 13, 2007: CPUC and Attorney General complaint of deceptive marketing leads to superior court judgment against calling card providers Devine Communications, Inc. and Megalink Telecom, Inc.


Last Modified: 10/11/2013

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