The Best Frauds, Scams, and Big Company Cons in America Today

Telecom Scams -- They're everywhere.  Here is one example.

RADIO SHACK SELLS THE "TRACFONE", A CELLULAR PHONE WITH PREPAID "MINUTES" YOU CAN USE ANYWHERE, ANYTIME ! Trouble is, you can't, and minutes that "never expire", you find, do!

EXECUTIVE SUMMARY:        Outright Deceptive marketing. Nature of Fraud: Deceptively claiming that features of their products and service are freely usable anywhere and at any time, but hiding in fine print (or not printed at all) caveats that invalidate these claims of greatness. Also failing to honor product returns of dissatisfaction with good cause, and ignoring customer complaints.

Basis of Investigation: Here is the original complaint that came in to us: I am a single woman who had to drive alone from Texas across several other states. Naturally, I was nervous, so I went to Radio Shack to see if I could get a mobile phone -- it would at least be security that if something happened, I could call on the road. The people at Radio Shack showed me the "Tracfone", and said I could use it anywhere, and all I had to do was prepay for so many minutes of use, and those minutes could be used any time I wanted. So I bought the phone and 30 minutes initially. The total cost was over $200 -- a bit steep, but I swallowed it. They gave me the distinct impression that the minutes I was buying would get me that many minutes of talking. So off I went, confident that 30 minutes would be more than enough for my trip. Well, I got into the next state and had a bit of car trouble, so rather than stopping on the freeway, I called back home to let them know what was happening, and ahead to where I was going, to tell them I might be late. Initially, I could not get through to anyone, but later I could. How surprised I was to find out that the "30 minutes" I had bought got used up in less than 5 minutes of talking! Good thing the car trouble was not so bad I had to stop, because if I had to, I was already out of time on that damn phone, so there was no one I could call for help! Guess I was just lucky. After I made it to my destination, that's when the real phone problems began. I tried to call Topp Telecom, to buy more minutes, but they have this stupid system, where you have to wait on hold for at least 30 minutes each time, sometimes up to an hour or more, just to buy more time on the damn phone. And the endless talk you had to listen to aggravated even a patient person like me. The "Gotchas" Hit: Then I find that each time I bought more time, I lost my original phone number, and they assigned me a new number every time. So then I had to call all my relatives back home and tell them the new number -- by which time I had used up all the time on the phone, and had to buy more -- what a great SCAM this baby is! The more I used the phone, the more I realized I was just shoveling money out the window. I grew to hate that phone, because -1- it never worked right, -2- half the places I went you couldn't get any reception, -3- the minutes I got were just BS -- in most cases, a 7 minute call would use up 15 to 20 of their "minutes", and finally -4- no one could reach me on it unless I was in a city. Even then, in the middle of a big city like Dallas, there were all kinds of places where I couldn't get any reception. I had to go through some long dialing routine, just to make a call. That alone used up about 2 to 3 minutes of each call! So for a 5 minute call on the air, the first two were used up punching in access numbers, half the talk time was lost to bad reception, and after about 2 minutes of talk, the recording said that I had used up 14 minutes of time! Hey those jerks in Florida who sell you the time have a really great con scheme going here! So I stopped using it less than 3 weeks after I bought it -- easily $350 down the drain. I had about 20 minutes left on the thing, so figured I'd just keep that for an emergency call or two, while on the road. Well what a surprise when I tried to use it about 3 months later, and got a message that the time was expired. What do they mean "expired"? I was clearly told by the sales rep. and the advertising stuff that the minutes could be used any time you want. Now what was going on? Finally, after dozens of busy signals, and wasting a day trying to get through to Topp Telecom, they finally fess up and tell me that the minutes cannot be used whenever you want -- they expire after 90 days. BUT, they said, if I bought more minutes -- at least 60 of them, they'd graciously extend my old minutes too! Wow, what a great scam that is! So to recover $25 of money down the drain, I had to spend about another $60 to $100 or so. [the minutes cost about $1.00 each]. That really made me angry! All along these jerks had lied to me, and had got me hooked on a lemon that was draining my bank account faster than I could keep track of it. I felt burgled, raped, and abused. I told them what a bunch of ----- they were, slammed the phone down, and cried. That phone nightmare had cost me more than the entire trip, and all I got for it was a few lousy calls to relatives. Never again, never again. K.S., TX. [Note: From details in the letter, we calculated that she paid at least $10 per minute for the calls she made, when you factor in lost time in trying to reach a good "reception" point, and the fact that it typically took 8 purchased "minutes" to get only 1 minute of real talking time, depending on location.]
Our Action and Verification: This letter hit us pretty hard. We feel for a single woman trying to make it across America today, and any company or person who takes unfair advantage of a woman in a tough situation like that, is asking for an investigation -- so we did. What a shock to find out that the plot gets even worse, the deeper you dig -- poor K.S. had only uncovered the half of it! When we got the complaint, there was only 2 weeks left on the 1-year Radio Shack warranty, so we swung into action. Calls to Topp Telecom got busy signals for days, then when we finally connected, we couldn't stand the barrage of idiotic sales pitches on the line, and hung up after 25 minutes of wait on hold. We don't have as much patience as K.S., because in our experience, any hold of longer than 10 to 15 minutes is a classic earmark of a company scamming the public by providing inadequate service. But we did confirm that the minutes expired, and we did confirm that the documentation she was given gave the clear impression that the time could be used "anytime". Next we called the Radio Shack dealer the phone was bought from, and they had the definite impression from what "they were told" that the phone could be used anywhere, that 1 minute actually meant 1 minute of talk time on the air, and that the time never expired. 100% confirmed. Then we called the Radio Shack head office, which in itself was a rite of passage. There is no number to actually talk to someone -- you have to leave a message. However, we did manage to talk to someone days before expiry of the warranty, and that person assured us they would follow up. But a week later, no one had, so we called again. Days later, a "manager" of customer service called back, and argued incessantly that they were not responsible for Topp Telecom's advertising "mistakes" (intentional omissions or hiding the facts from the purchaser) -- and finalized the call by saying that since the warranty had expired, there was nothing they were going to do about it. How convenient that she waited to call back more than a week after the warranty had expired! We also asked if the PIN number of the phone could be changed so that the customer could at least get some value out of the phone with another cellular provider -- but they said it was "impossible" to use the tracfone with any other service. (We later determined this was untrue -- but the conversion is not worth the time and hassle, since other providers more or less give their phones away with service -- Radio Shack is one of the few who rip people off for the phone cost.) Applicable Statutes: Statutes, codes and Act protecting U.S. buyers from consumer fraud specifically prohibit making claims that are nullified in fine print (or not printed at all, but only found out after purchase). Although many companies today are doing this border-line consumer fraud, some are more flagrant than others -- in general, companies offering cellular service are right up at the top. This is a classic example of how no company individually may be guilty of fraud alone, but together, their deception, collusion, inaction, or refusal to give customer satisfaction, has effectively resulted in a classic case of consumer fraud by deceptive marketing. In other words, all the details, caveats and expirations of a purchase of equipment and service were carefully worded and concealed from a normal intelligent purchaser so as to prejudice that buyer to believe that he or she was getting features and service that he or she was in fact not getting. Federal Government Involvement: The Federal Government is utterly powerless to stop this kind of subtle consumer fraud, because they are too stupid to be even looking for it. They are so intently focussed on cases you'd normally consider criminal fraud -- obvious and flagrant theft of money or other worth from people and companies -- that they have no appreciation or understanding of how subtle fraud, or "carefully worded marketing", can rob a much larger cross section of consumers of much more money than a few criminal cases. Let's face it -- slick marketers are too far ahead of the government to get caught. They can change wording so fast that it become difficult or impossible to prove that today they covered the tracks of what was obviously fraudulent claims yesterday. The government only evaluates the "current" situation, so they have NO HOPE of catching slick and nimble marketing companies. Core Issue: Where there is subtle consumer fraud -- by making grandiose claims that are later nullified by hidden conditions only evident in fine print or only after purchase -- there is only one definitive way to evaluate whether it truly amounts to fraud: (1) Take the claims in the promotional marketing materials at literal face value, (2) look at the end result of what a consumer has to live with after purchase, and (3) decide if they are one and the same scenario. If not, there was some kind of fraud or deception along the way! Evaluation: So we used those criteria to evaluate this subtle marketing scam: we compared the initial promise with the end result, to accurately assess whether the "net effect of fraud" had been consummated. In the case of this Tracfone, there was absolutely no indication given to the purchaser of all the caveats involved in this phone-plus-service purchase. She was told that many providers could sell time -- in fact, only ONE can, and they charged at least $1.00 per minute for "phone minutes", which in remote locations translated to only tenths of a minute actually on the air. Reception, in reality was so spotty that the phone could only be used in 50% of locations, for only 10% of the value paid for it. In addition, there was no indication given to the purchaser that the time would expire, or of the hassle to get more time, or the cute scam of having to buy more time just to activate "expired" time, that wasn't supposed to expire. Finally, the net result of "normal use" was that the phone cost more than $10 per minute to use! In summary, the buyer was given NO indication of any of these caveats, just glowing hype that this phone was a miracle that you could carry forever and always use anywhere, at any time. We conclude that this is a classic case of subtle marketing fraud, by presenting glowing hype to the user, but conveniently hiding all the caveats in fine print, or undisclosed, or revealed only after purchase. Conclusion: Radio Shack has sold thousands of these life-giving "Tracfones" all over the country. How many other people have been equally defrauded of at least $200 to $350 a piece on this rip-off marketing scam? We heard something about marketing fraud in the media, and noticed that after that, Topp Telecom started to print the caveat of the minutes expiring after a certain time on their website, perhaps even on the brochures -- but when our buyer plunked down her money, there was no such warning given. This case is an ideal one for a very skilled class-action attorney to look into. We suspect that many hundreds of customers in the past have been equally scammed by this cute collusion between Topp and Radio Shack, and there is possibly a bigger issue involved here. We view Radio Shack as the primary defaulter -- refusing to honor a customer return, refusing to help, conveniently procrastinating until the warranty had expired, and failing to educate their sales people as to the severe limitations inherent in use of this extremely proprietary bundle, tied to only one "provider". What is your conclusion? Fraud, or just slick marketing that takes in unsuspecting customers, who don't think to ask all the right questions? Who ever does, until they've been burned by one of these glowing hype stories from cellular companies -- who promise the world, but can't even deliver a clear call? Our caution -- keep away from cell phones until you have ruthlessly interrogated the source company itself, and actually called their support lines. If you get more than a 5 minute hold time, dump them! Also, watch Radio Shack. They like to sell stuff of dubious merit and then refuse to make good on their warranties. Get them to put an unconditional money-back guarantee in writing. When you find out they won't, maybe it's time to start looking for companies that do. They are out there.
Principles Involved: If a glowing marketing pitch does not match the reality of actually using a product, and a normally intelligent buyer was not told about or apprised of the possible caveats or pitfalls of an item or service, then you tell us how anyone can construe this to NOT be a fraudulent marketing scam? Look up the definition of fraud in a legal dictionary. You might be really surprised to read what it says!
NOTE: See the Hot New Mini-Frauds Page for ongoing Updates on interesting issues.   UPDATE: There have been so many TracFone complaints, we had to move them all to a separate page. The Tracfone reader complaints are now all on this page.     Latest Update May 18, 2002