• Business Week, Wednesday, July 9, 2008 12:30 PM

Florida's Attorney General has struck settlements with 10 phone card companies accused of such practices as false advertising and assessing hidden fees that will force vendors to overhaul everything from fee structures to marketing methods.

In a survey of 45 prepaid cards conducted last November by Washington, D.C.-based Network Analytics, card companies delivered only 60% of the minutes they promised in voice prompts. And, according to critics, many fees are hidden -- leaving customers feeling they get more minutes than they really do. Companies can charge "connection" and "hang-up" fees as high as $2, and some round up calls in three- or four-minute increments.

The Florida crackdown augurs sweeping change in the $4 billion prepaid phone-card industry. IDT, one of the biggest players in the prepaid-card business, says it knows of roughly a dozen other states that are conducting similar investigations, and the Federal Trade Commission brought enforcement actions against seven companies earlier this year.

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