Earlier this month, T-Mobile announced that it will soon launch a new service that will enable customers to purchase digital content using their smartphone, PC, or tablet and bill it to their phone accounts. According to Consumer Union (New York), a testing and information organization, T-Mobile's announcement is the latest development in emerging mobile payment services that raises concerns about whether consumers will be protected from fraud or merchant mistakes.
"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 know that they'll 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.
According to Consumers Union, 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, according to Consumers Union. If mobile payment transactions are linked to credit cards or debit cards consumers are entitled to the same guaranteed federal protections that apply when a credit card or debit card is used directly in a transaction, says the organization.
Mobile charges linked to other forms of payment don't have these legal protections, according to Consumer Union. 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 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."