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Release date 06/15/2011
SAN FRANCISCO, CA — Mobile payments are being touted as the next big thing for consumers but could pose a financial risk when mistakes are made by merchants or if a phone is lost or stolen and used to make fraudulent charges. Consumers Union, the nonprofit publisher of Consumer Reports, is calling on wireless carriers to make sure consumers are protected from mobile payment fraud and mistakes by adopting strong safeguards in customer contracts.
In a report on mobile payments issued today, the group highlighted how consumer protections vary widely for different mobile payment methods, how wireless carrier contracts fail to provide needed safeguards, and tips for consumers using mobile payments. Consumers Union has launched a Facebook campaign to encourage wireless carriers to adopt stronger contractual protections for mobile payments linked to wireless accounts.
“As more Americans start using mobile phones to make purchases, we need to make sure that consumer protections keep pace with all the new technological advances,” said Michelle Jun, senior attorney for Consumers Union’s Defend Your Dollars campaign (www.DefendYourDollars.org). “Consumers shouldn’t have to worry that a lost or stolen mobile phone or billing error could turn into a costly financial headache.”
On May 23, Consumers Union sent letters to 18 wireless carriers urging them to strengthen their contracts so consumers using mobile payments are provided protections similar to those offered to credit card or debit card users. CREDO Mobile is the only wireless carrier that has responded to the letter to date. CREDO maintains that it provides ample safeguards, although Consumers Union believes its contract could be strengthened to more fully protect consumers.
Federal law currently offers protection to consumers in the event that their credit card or debit card is lost, stolen or misused. Credit cards provide the strongest protections that help limit a consumer’s liability, while debit cards provide some, but not all, of these protections. If mobile payment transactions are linked to credit cards or debit cards, then consumers are entitled to the same guaranteed federal protections that apply when a credit card or debit card is used directly in a transaction.
Unfortunately, mobile charges linked to other forms of payment don’t enjoy any of these legal protections. For example, if a mobile payment transaction is funded by a prepaid card or gift card, consumers are not entitled to any federal protections that limit how much money they can lose to unauthorized transactions or errors. If the payment service is provided directly by the wireless carrier and the charges appear on the customer's cell phone bill, the product might escape consumer protections entirely unless the contract provides them. If the wireless carrier asks the consumer to make a prepaid deposit to cover future charges, protections also will be missing unless they are included in the contract.
Consumers Union reviewed the contracts of 18 wireless carriers to find out what kind of baseline protections they provided to consumers regardless of the kind of mobile payment method used to make charges:
Consumers Union has called on wireless carriers to strengthen their contracts by adding a number of protections against unauthorized or erroneous mobile payment charges, including:
“Ultimately, the new Consumer Financial Protection Bureau will need to enact mandatory protections for consumers that cover all forms of mobile payments,” said Jun. “In the meantime, wireless carriers should provide strong mobile payment safeguards in their contracts so consumers don’t lose money to mistakes or fraudulent charges. Other mobile payment service providers should adopt similar protections.”
Contacts:Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.
© 2011 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.
Consumer Reports is a nonprofit membership organization that works side by side with consumers to create a fairer, safer, and healthier world. For 80 years, CR has provided evidence-based product testing and ratings, rigorous research, hard-hitting investigative journalism, public education, and steadfast policy action on behalf of consumers’ interests. Unconstrained by advertising or other commercial influences, CR has exposed landmark public health and safety issues and strives to be a catalyst for pro-consumer changes in the marketplace. From championing responsible auto safety standards, to winning food and water protections, to enhancing healthcare quality, to fighting back against predatory lenders in the financial markets, Consumer Reports has always been on the front lines, raising the voices of consumers.
© 2011 Consumer Reports. The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is an expert, independent, nonprofit organization whose mission is to work side by side with consumers to create a fairer, safer, and healthier world. We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports® magazine, ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our prior written permission. Consumer Reports will take all steps open to it to prevent unauthorized commercial use of its content and trademarks.