Card Sharks

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To help the nearly one in 10 city residents who don’t have a home phone–or sometimes even a home–the Coalition for the Homeless runs New York Community Voice Mail. Clients at city homeless, foster care, domestic violence, immigration and AIDS agencies can use its voice mail numbers to maintain contact with employers, caseworkers, landlords and family.

But program director John Sanful discovered earlier this year that someone else was taking advantage of his service, too. Looking at his agency’s Bell Atlantic bill, he noticed mysterious “service charges.” As Sanful would later learn, his clients were getting crammed.

“Cramming” is the illegal practice of loading charges on a residential phone bill without the customer’s consent. It’s only the latest phone scam feeding on low-income communities. Using pyramid schemes, fake phone cards and sweepstakes contests, companies target New York’s poor and immigrant communities with offers of cheap calls and easy money.

Prepaid calling cards generally provide an access number and PIN, then drain the card in one-minute increments. In the past couple of years, some vendors have quietly begun adding another set of charges, without telling consumers, by adding them to their home phone bills. Companies entice customers by offering sweepstakes, discounts and supposedly “free” prepaid phone cards, all of which require an applicant to provide a home phone number. And then come the charges, every month, on the phone bill.

Since Community Voice Mail serves more than 2,300 clients, the fees added up to hundreds of dollars. After a maze of phone calls to billing services, long-distance carriers and Bell Atlantic, Sanful traced some of the charges to a Texas-based company called Consumer Access. A company representative told Sanful that in at least one case a client signed up for a card at a sweepstakes entry box.

“Most of these individuals are below poverty level,” remarks Sanful. “Given the opportunity, who wouldn’t want to win something for free?” Last year, a Missouri court issued an order against Consumer Access for using sweepstakes to lure customers into a calling card, for which they were charged even if they never used the card. In February, 15 states (not including New York) reached a refund agreement with the company. An attorney for Consumer Access says the company no longer uses sweepstakes to sign up customers.

Many clients who use Sanful’s service depend on phone cards for their outgoing calls, which come with their own problems. Last year, for example, California-based Destiny Telecomm recruited 7,500 New York State residents to sell phone cards with promises of hefty commissions and free cards. It was a classic pyramid scheme, in which salespeople who enlisted others would earn more money and more cards.

Those cards turned out to be useless. When Destiny’s president disappeared, the state Attorney General’s office recovered $100,000 by freezing his bank account. But since pyramid schemes are illegal in New York State, many of Destiny’s dupes were ineligible for restitution. Phone cards are an ideal lure for scams like these. Immigrants who lack their own phones are particularly dependent on cards to maintain ties overseas and unlikely to complain if they’re ripped off. About 90 percent of prepaid phone cards are used to make international calls, estimates Assistant Attorney General Charlie Donaldson. “A lot of the people would prefer that the government not know that they’re here. They come from countries where the government is not your friend,” he says.

Donaldson did, however, receive steady complaints on a company that advertised “super-duper good rates for calls to India.” Readers sent in $100, only to receive cards that either didn’t work at all or quit after 20 minutes. Phone cards that simply don’t work remain the most common scam.

“It’s pretty obvious what they’re for,” says Glenn von Nostitz, the city’s deputy public advocate for research and investigation. “They’re sold pretty extensively in East Harlem–you don’t see them on the Upper East Side. Some of them even have flags from different countries.” His office has called for the state Public Service Commission to regulate phone cards stringently, as California, Florida, Georgia and other states have done.

In the meantime, Bell Atlantic plans to offer customers the option of blocking unauthorized charges. But the company still has contracts with many of the billing companies that facilitate cramming. And regulators says the appeal of phonecards to both consumers and predators will inevitably to lead to other scams. “Stay tuned,” warns Donaldson. “These guys will come up with something new.”