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T-Mobile’s mobile payment plan risky for consumers

August 8, 2011

T-Mobile “Direct Carrier Billing” Program Could Leave Consumers Vulnerable

Wireless Carrier’s Mobile Payment Plan Not Covered By Current Statutory Protections Against Fraud Or Mistakes

SAN FRANCISCO, CA – Earlier this month, T-Mobile announced that it will soon launch a new service that will enable its customers to purchase digital content using their smartphone, PC, or tablet and bill it to their phone accounts. T-Mobile’s announcement is just the latest development in emerging mobile payment services that raises concerns about whether consumers will be protected from fraud or merchant mistakes, according to Consumers Union, the nonprofit publisher of Consumer Reports.
“Mobile payment products promise a new, convenient way to pay but consumers could end up losing money if something goes wrong with their transaction,” said Michelle Jun, Senior Attorney for Consumers Union. “Consumers need to be protected in the event of a billing error or if the goods they order aren’t as promised or if they become victims of fraud. Mobile payment services like the one being launched by T-Mobile could put consumers at risk and fail to provide the protections they deserve.”
According to T-Mobile, its “Direct Carrier Billing” service will enable customers to make purchases without “the need to manually enter credit card information.” Instead, these purchases will appear on their monthly T-Mobile bill. Unfortunately, mobile payment charges that appear directly on a customer’s cell phone bill don’t enjoy the same statutory protections consumers currently get when making payments using a credit card or debit card.
“T-Mobile’s mobile payment plan may eliminate the need to enter credit card information when making purchases but it also tosses out the consumer protections that come along with credit cards,” said Jun.
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.
Mobile charges linked to other forms of payment don’t enjoy any of these legal protections. If the mobile payment charge appears on the customer’s cell phone bill, the product might escape consumer protections entirely unless the contract provides them. Consumers Union’s review of the T-Mobile’s current customer contract found that those protections were lacking.
Last June, Consumers Union called on T-Mobile and other wireless carriers to adopt stronger consumer protections in their contracts. At the time, a T-Mobile representative indicated that the carrier would respond to the request but no response has been received by Consumers Union.
“If wireless carriers expect consumers to feel comfortable using mobile payment services, they need to provide at least the same level of protections that come with credit cards,” said Jun. “T-Mobile and other wireless carriers can safeguard consumers from mobile payment fraud and mistakes by putting those protections in their contracts.”
For more information on the lack of consumer protections provided by some emerging mobile payment products, see Consumers Union’s report, “Mobile Pay or Mobile Mess: Closing the Gap Between Mobile Payment Systems and Consumer Protections.”
Michael McCauley (mccami@consumer.org) 415-431-6747, ext 126