Nonregulatory Responses Urged for Stored-Value Cards

Banking industry groups clashed with consumer advocates and law enforcement officials Thursday over whether new laws are necessary to protect consumer privacy and security in the blooming world of electronic commerce.

At the second public meeting of the Consumer Electronic Payments Task Force, witnesses staked out familiar ground. Comments and questions from task force members indicated they are leaning toward light regulation of stored-value cards and other new payment technologies.

Comptroller of the Currency Eugene A. Ludwig, the task force's chairman, emphasized in opening remarks that the interagency panel hoped to identify "innovative nonregulatory responses that may be needed for consumers in this developing market."

"Without consumer confidence in security, these new electronic devices simply will not take off," said Robert Pitofsky, chairman of the Federal Trade Commission. He asked panelists whether regulations were necessary to comfort the public.

Industry groups, such as the Consumer Bankers Association and the Smart Card Forum, pointed to their efforts to develop voluntary guidelines for handling customer information and disclosing consumer rights.

"Stored-value card products are not very far down the road to development and implementation," said Janet Koehler, a senior manager at AT&T Universal Card Services who represented the Smart Card Forum. Premature regulation could "impede the growth" and "conceivably stop development" of new technologies.

But consumer advocates called for the government to set standards. "We need to be real about the limitations of disclosure," said Michelle Meier, government affairs counsel at Consumers Union. Relying on self-regulation would be "very, very wrong and misguided," she added.

Laws that protect consumers from lost or stolen checks and errors by credit card companies should be extended into cyberspace, she said. "Liability and error resolution rules should be standardized across all electronic payment systems."

Panelists also disputed whether electronic payment should be untraceable.

"Robust anonymity will be the key to consumer acceptance of new payment systems," said Marc Rotenberg, director of the Electronic Privacy Information Center in Washington.

But money launderers and other criminals would abuse anonymity, and massive fraud could taint legitimate products, said Peter J. Toren, a computer crime trial attorney at the Justice Department. "Before the use of stored-value cards will become widespread, uniform legal standards governing the issuance and use of stored-value cards must be enacted," Mr. Toren said.

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