Although payments with smartphones are about to be tested, the Consumers Union, publisher of Consumer Reports, wants businesses that offer mobile phone payments to provide protections to individuals who use prepaid cards or have their purchases charged to their cell phone bills.
“There aren’t consumer protections for these two forms of payment,” said Michelle Jun, staff attorney for Consumers Union, which is based in Yonkers, N.Y.
Jun noted credit and debit cardholders are protected from fraudulent card use. Issuers place a $50 limit on illegal use of a credit card. Fraud on a debit card can expose a cardholder to $500 or more in liabilities depending on when the person reports an illegal transaction. Smartphone users would attach their debit and credit card accounts to their phones to complete a transaction.
Prepaid cards, however, lack even the protections applied to traditional debit cards because the funds are pooled from many cardholders, she explained. Smartphone users also could attach their reloadable prepaid card account information to their phones to purchase products.
Jun said it is not clear how many smartphone users will use prepaid cards or charge purchases to their mobile phone bills. She hopes, however, the Federal Reserve Board will enact new regulations offering protections for these two forms of payment before the end of the year. The new Consumer Financial Protection Agency also may address the issue, Jun said.
The Consumers Union called for clarity on protections for consumers who use their smartphones for mobile payments several days after Bank of America Corp. announced it will begin a mobile phone pilot this September in New York City. Charlotte, N.C.-based Bank of America is scheduled to conclude the pilot by the end of the year.
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Consumers Union wants protection for smartphone payments
- Frederick Lowe
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