Various unregulated new mobile-payment services proliferating in the U.S. could be putting certain consumers at risk for fraud, Consumers Union, a nonprofit consumer-advocacy organization, announced Aug. 24.
The Yonkers, N.Y.-based organization, publisher of Consumer Reports, is calling for legislators and regulators to take appropriate action to ensure that consumers are protected when using any of the emerging services enabling them to pay for products and services with smart phones. These services may open the door to consumer losses through fraud and mismanagement because many are not covered by existing consumer protections, the organization contends.
“Many new mobile-payment services that are emerging or being tested in the U.S. are not necessarily covered by the type of consumers protections available through a traditional credit or debit card, which is a source of concern to us,” Michelle Jun, a staff attorney for the organization, tells PaymentsSource.
Federal law protects consumers in the event their credit card or debit card is lost, stolen or misused, but current protections are “badly fragmented” and do not necessarily extend to all types of emerging mobile payments, Jun notes.
Prepaid cards may pose additional risks because few provisions exist for resolving disputes with merchants, she adds.
So far, the organization has not seen broad examples of consumer fraud from mobile payments, but there is a great deal of opportunity for consumer exploitation as mobile payments gain momentum, Jun says.
In Asia, for example, emerging mobile-payment systems drive charges to consumers’ cell-phone bills, she notes.
“As mobile payments begin to turn up in new channels, through new devices, (and) with banks and merchants playing different roles than ever before, we are dealing with an entirely new animal than basic credit and debit cards, where consumer protections are well established,” Jun says.
The organization is “hopeful” the Consumer Financial Protection Bureau, established when President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law last month, may play a role in helping to regulate mobile payments, she says. The bureau is to be housed within the Federal Reserve.
“Although it’s early in the process, and the consumer-protection bureau is not yet up and running, we hope that providing consumer protections for mobile payments is one of the roles it will assume,” Jun says.
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