Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC Report Calls for Greater Consumer Protection for Mobile Payments, (Mar 8, 2013)

By Tobias J. Gillett, J.D., LLM.

The FTC staff today issued a report, setting forth a variety of current mobile payment issues, making some recommendations regarding the issues, and calling for strengthened consumer protections. The FTC’s report, titled “Paper, Plastic . . . or Mobile?: An FTC Workshop on Mobile Payments,” was informed by views expressed at a 2012 FTC workshop on mobile payment issues.

The report identified three primary areas of concern in the mobile payments area: dispute resolution, data security, and privacy.

The FTC staff explained that differing levels of protection in the event of fraudulent payments or unauthorized charges can leave consumers exposed to more liability for those charges than they may expect. Bank credit card-based payment methods may cap liability at the first $50 of an unauthorized transfer if reported within two business days, and up to $500 if reported thereafter. However, consumers who do not report unauthorized bank account debit transactions within 60 days after the mailing of their periodic statement can face unlimited liability. Other payment methods, such as those linked to a pre-paid debit card, may not provide any statutory protection.

The report encourages companies to develop clear policies regarding fraudulent and unauthorized charges and to convey those policies to consumers. It also suggests that policymakers should consider the benefits of more consistent protections and should weigh them against the costs of implementation.

The report also raises concerns regarding the practice of “mobile carrier billing,” whereby consumers can charge payments directly to their mobile phone bills. This practice presents the issue of “cramming,” in which third parties place fraudulent charges on those phone bills. The report observes that consumers currently do not have any federal statutory protections governing disputes to those fraudulent charges.

The report outlines several protections consumers should receive that the FTC incorporated into a comment to the FCC, including “the ability to block all third-party charges on their mobile accounts”; notice from their mobile carriers that third parties may place charges on their accounts and information on how to block those charges; and “clear and consistent processes for consumers to dispute suspicious charges.” The report notes a variety of other proposed approaches to the problem, and states that the FTC will hold a roundtable on the problem in May.

The report also addresses consumers’ concerns with data security surrounding their mobile payments. The report observes that mobile payments have the potential for enhanced protection through the use of end-to-end encryption throughout the payment, and through “dynamic data authentication,” permitting the generation of unique payment information for each transaction. The report calls for the use of strong security measures by mobile payment providers. The reports also suggest that consumer education in mobile security techniques may also play an important role.

The report also raises the privacy issues associated with mobile payments, noting that mobile payments permit merchants, financial institutions, and other third parties access to information unavailable with traditional transactions. The report outlined three recommendations for protecting consumer privacy previously set out in its study “Protecting Consumer Privacy in an Era of Rapid Change”: (1) “privacy by design,” encouraging companies to consider privacy at every stage of product development; (2) “simplified choice for businesses and consumers” regarding disclosure of information, and (3) “greater transparency” about data collection practices.

News: ConsumerProtection Privacy FederalTradeCommissionNews