New law aims to short-circuit public phone overcharges

1-no phoneThe trouble started when Tom King’s cellphone died on his way to a job interview last year. He saw a public phone at Washington’s Bainbridge Island Ferry and was relieved when a sticker reassured him that he could make a four-minute call for $1, he says.

That didn’t turn out to be entirely accurate. King made four one-minute calls using his credit card, for which he expected to pay $4. But a few days later, he discovered that he’d been charged $14.98 for each connection, for a total of nearly $60. “I was shocked,” he says.

Stories like King’s are a cautionary tale for travelers. Fewer than 500,000 public telephones remain in the United States, operated by a network of independent telecommunications companies that set their own rates, which can often be startlingly high. Verizon, the last major telecommunications provider of pay phone services in the United States, left the industry in 2011 when it agreed to sell almost all its remaining 50,000 phones.

Stories like King’s have also inspired one California state senator to propose a law that would require telecommunications companies to disclose credit card charges for payphone calls. California Senate Bill 50, which was introduced last month, would amend a 1993 rule requiring payphone operators to disclose the cost of a call so that it would also include any calls made with a credit or debit card.

Telecommunications companies are taking advantage of a “loophole” in the rules, says Sen. Ted Lieu of California. “At the time the law was passed, using a credit or debit card for payphone calls was uncommon, and thus not addressed by the law.”

Consumer advocate John Mattes, an attorney who has unsuccessfully sued several companies offering these pricey calls from public phones, says that he hopes the legislation will have a ripple effect, encouraging other states to adopt similar disclosure requirements and eventually compelling the federal government to close the loophole once and for all. “It would be a long-overdue victory for consumers,” he says.

No one knows exactly how many travelers have fallen for these phones, but there have been plenty of reports of overpriced phone calls. Last year, several media outlets reported that U.S. soldiers in transit through Germany were being billed up to $40 for a one-minute phone call home via a company that claimed to be based in Switzerland. But problems with credit-card calls from public phones cross my desk with some regularity, and normally, my inquiries on behalf of the customer result in a partial or full refund.

King, who’s a writer by trade, didn’t take the $60 charge lying down. He tracked the charge to a company called WiMacTel, a company based in Palo Alto, Calif., that offers payphone services to “inmate facilities, payphone operators, hotels, hospitals, universities/colleges, local exchange companies and consumers nationwide in the USA and Canada,” according to its Web site.

“WiMacTel promises customers that their payphone systems can make payphones profitable again,” says King. “Well, duh! At nearly $15 a minute, I imagine so.”

James MacKenzie, WiMacTel’s chief executive, says that the $1 rate on the pay phone King saw was for coin calls, not credit cards. “Unfortunately, there is insufficient space on the payphone to provide all the various rates associated with operator service calls,” he told me.

Instead, customers can opt in to disclosure through a series of voice prompts when they use WiMacTel’s service. MacKenzie acknowledged that credit-card call rates were significantly higher, attributing them to the “higher costs” associated with those types of calls, including the expenses incurred by having to validate the payment method, billing and collection, bad debt, offering live operators and credit card processing fees.

However, after King complained, the company lowered his bill to $22. “Still pretty high for a payphone call,” King notes.

Excessive phone charges used to be one of the staples of my consumer advocacy practice. Hotels considered their phone lines a profit center and would add generous surcharges to their guests’ phone bills, sometimes even imposing fees for lifting the phone from the receiver. That’s largely gone now, thanks to the preponderance of cellphones.

But a smaller threat remains. Sen. Lieu estimates that his bill would affect roughly 30,000 public phones in the state of California, located in places where constituents can least afford the high charges, including prisons and hospitals.

How do you avoid these fees? Keep an extra battery handy when you travel, so that if your cellphone goes dead, you won’t have to resort to using a payphone. If you must use a pay phone – and there are still times when you’ll need to, such as when there’s no reception – then buy a prepaid phone card.

Given the risk of being overcharged by credit card or debit card, you should reach for your plastic only as a last resort. Try using coins or bills to pay for the call, if possible. We’re still a long way from closing the disclosure loophole for credit-card calls, and until then, it seems, your payphone calls could cost a lot more than you expect.

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