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Consumer Reports urges Congress to adopt protections for mobile payment users

House Financial Services Committee holds hearing on the rise of mobile payments 

WASHINGTON, D.C. – In testimony before the House Financial Service Committee’s Task Force on Financial Technology on Thursday, Consumer Reports’ Christina Tetreault will urge lawmakers to adopt reforms that would make mobile payments safer.  Tetreault will call for strong legal safeguards, including tough privacy standards and uniform protections against fraud and payment mistakes regardless of the underlying financial account used to fund each transaction.

The House Financial Service Committee’s Task Force on Financial Technology (Is Cash Still King? Reviewing the Rise of Mobile Payments), will take place on Thursday, January 30, beginning at 9:30am ET, and can be viewed online.

“While mobile payments have brought greater convenience to financial transactions, these platforms also come with potential risks for users,” said Tetreault, senior policy counsel for Consumer Reports.  “Mobile payment users may end up losing money to fraud and mistakes depending on which financial account they link to their payment app.  Like all electronic transactions, mobile payments are inherently vulnerable to privacy and security threats.”

Tetreault continued, “Congress can fix these problems by creating uniform protections for all payment types and establishing strong privacy protections with limits on data collection and sharing.  We need vigorous oversight to ensure industry compliance and real consequences for mobile payment providers that fail to keep their platforms safe and secure.”

Tetreault noted in her testimony that current law irrationally applies different levels of consumer protection to different payment methods.  For example, mobile payments linked to credit cards afford the strongest protections in the event of fraud or billing errors followed by mobile payments funded by debit cards or bank accounts.  Mobile payments linked to gift cards have few protections, and payments charged to mobile phone bills fewer still.  The most significant differences are the limits on liability for users in the event of fraud or errors and the right to withhold payment when there is a dispute.

CR’s research has found that mobile payment providers make it relatively difficult for users to find help in the mobile payment wallet or app, and few make telephone numbers publicly available.  Providers typically tell users that they are on their own to get their money back when they mistakenly send funds to the wrong person. In addition, numerous media reports have noted how some consumers are scammed into sending money via mobile payment apps, only to discover that these transactions have the same level of protection against fraud as cash.

Adoption of mobile payments in the U.S. lags behind other countries, in part, because Americans are concerned about whether the platforms are secure.  Both the Consumer Financial Protection Bureau and the Federal Trade Commission have sued mobile payment providers over security practices.

CR’s 2018 research on peer-to-peer payment apps found that providers should do more to keep users safe.  Several P2P apps, including Venmo, Square’s Cash App, and Facebook Payments in Messenger, failed to require a password, PIN, or fingerprint for repeat access to the app or to initiate a transaction when their default settings are in place.

While mobile payment services are touted as free, providers reap a rich trove of data by engaging in all-encompassing surveillance of users and reserve broad rights to use their information for unrelated purposes, including targeted advertising.  Providers also share this data in ways that users may not reasonably expect.

For a more complete explanation of Consumer Reports concerns and recommendations for how providers and Congress can make mobile payments safer, see Christina Tetreault’s full testimony.