FTC Stops Unlimited Inmate Calling Plan Scams

On Friday, the Federal Trade Commission (FTC) announced that it issued a temporary restraining order against Disruption Theory LLC and Emergent Technologies LLC, doing business as inmatecall.com and inmatecallsolutions.com, for a purported scam whereby they claim to offer unlimited inmate calling plans when they do not; the FTC noted that this is its first case for inmate calling plans.

The FTC sued the companies and their operators earlier in October claiming that they “advertised and market calling plans for unlimited minutes, which they did not provide.” Moreover, “[p]rison and jail calls are provided by specialized service providers, which have contracts with correctional facilities and charge for calls at predetermined per-minute rates” however, these specialized service providers do not offer nor have they offered unlimited plans. The FTC averred that the operators “preyed on inmates’ families and friends who rely on phone calls to stay in touch with their incarcerated loved ones – particularly during the COVID-19 pandemic when in-person visitation has been suspended at prisons” and they may have been looking for an alternative to an expensive per-minute plan. The FTC claimed that the providers charged $29.97 for one month, $49.97 for three months, and $89.97 for a year of allegedly unlimited service. However, after paying for a plan online, consumers were told that they must “open and fund a separate, prepaid account with the specialized service provider approved by their correctional facility.” According to the FTC, the operators made it challenging for consumers to reach the companies or to receive refunds. Consequently, the FTC alleged that the companies and their operators violated the FTC Act.

“These defendants ripped off families with loved ones in prison, selling them fake calling plans that were supposed to allow unlimited calls with those inmates,” Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said. “Especially with COVID-19 restrictions now in place, the phone is a lifeline for these families, who shouldn’t have to deal with this kind of exploitation.”

The FTC’s recent action comes after the Federal Communications Commission (FCC) announced in August that it was responding to calls to reduce inmate calling services rates after the District of Columbia Circuit rejected previous FCC efforts for this reform; the D.C. Circuit highlighted various aspects for reform. The FCC noted that the Communications Act requires that the inmate calling rate is “just and reasonable.” Moreover, the FCC looked at ancillary service charges, which are separate fees from the per-minute rates. The D.C. Circuit asked the FCC to see if these charges could be separated into interstate and intrastate components and to exclude intrastate components for the FCC’s rules. The FCC determined that these could not be separated, except on a limited basis, thus these service providers are predominantly subject to the FCC’s rules for services rates, but FCC Chairman Ajit Pai claimed that state counterparts must act to reform intrastate inmate calling service rates. The FCC did suggest new rate caps for interstate calls, which will reduce these rates. Lastly, this was the first time that the FCC also proposed rate caps for international inmate calling services.