The emerging U.S. mobile-payments market could be putting consumers at risk for fraud, and a consumer-advocacy group is urging wireless carriers to protect its customers from unauthorized transactions.
Consumers Union, a Yonkers, N.Y.-based organization and publisher of Consumer Reports, highlighted in a report released June 15 how consumer protections vary for different mobile-payment methods. It also pointed to how wireless-carrier contracts fail to provide necessary safeguards in the event of a billing error or a phone becoming lost or stolen (
The organization sent letters May 23 to 18 wireless carriers urging them to strengthen their mobile contracts and give consumers similar fraud protections that come with credit and debit cards.
San Francisco-based Credo Mobile was the only carrier to respond. The company said it provides enough protection, but Consumers Union suggested in its report that the carrier’s customer wireless contract could be strengthened.
Verizon Wireless, which on June 13 announced a new direct-to-mobile billing service (
“I would note that before we roll out any products or payment services, they will need to meet stringent security, safety and privacy thresholds, as well as be easy for consumers to use,” a Verizon spokesperson said in an email.
Consumers are entitled to guaranteed federal protections if a mobile-payment method is linked to a credit or debit card, Consumers Union states in the report. Prepaid cards do not have the same federal protections.
In direct-to-mobile billing scenarios, the service might lack consumer protection unless stated in the wireless contract, the report said.
Of the 18 wireless contracts Consumers Union studied, 16 required consumers to pay for charges resulting from merchant mistakes or other errors while an investigation of disputed charges is pending. The study found that only four contracts explicitly protected consumers from liability for disputed charges when a mobile device is lost or stolen.
Consumers Union decided to take action because of the recent rise in activity in the mobile-payments market. “Our position has consistently been that consumers need protection no matter which payment method is adopted,” Michelle Jun, a staff attorney for the organization, told PaymentsSource in an interview.
The organization has launched a Facebook campaign to encourage wireless providers to strengthen consumer protections and make consumers more aware of the emerging mobile market, Jun said.
“There are a lot of consumers who have heard about new mobile technology but may not think about what happens with fraud in those cases,” she added. Consumers are probably thinking more about “how cool the technology is,” Jun said.
Consumers Union is optimistic that the Consumer Financial Protection Bureau will examine mobile payments when it begins operations next month, Jun said. “They do have the jurisdiction to provide the strongest protections for consumers,” she added.
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