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T-Mobile payment system leaves users vulnerable, report says

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T-Mobile's new smartphone-based payment system won't adequately protect users from mistakes, theft and fraud, according to Consumers Union, the publisher of Consumer Reports magazine.

T-Mobile last week announced its so-called Direct Carrier Billing, which will let T-Mobile users buy content off the Web using a T-Mobile account, allowing users to avoid the hassle of entering credit card numbers every time they buy something online. The service will be available later this month, the company says.

But critics say consumers should be careful. Legal protections limit users' liability if their credit and (to a lesser extent) debit cards are used to make unauthorized purchases, but transactions with T-Mobile phones are not afforded the same protections. In general, once consumers report unapproved transactions on their cards, they are liable for the first $50 but no more.

With T-Mobile's system, however, if you find a huge charge you didn't make, you must rely on the good faith of T-Mobile, said Michelle Jun, a senior attorney at Consumers Union. That means the company has discretion to approve a refund -- or not.

"What happens if someone ends up with a big bill that doesn't reflect what they actually bought?" Jun said. "It's basically up to you and the carrier to see what comes of it -- there aren't any protections that guarantee you won't be on the hook."

If consumers refuse to pay, Jun said, they could face late charges or collection fees -- a situation they are protected from when disputing credit card charges.

T-Mobile said it was preparing a response to the Consumers Union report. We will update this post when it arrives. 

The company also pointed to a news release from the announcement of its Direct Carrier Billing service, which notes that "payments that are processed using direct carrier billing will be secured and monitored by both T-Mobile and the billing service partners," and that the system is subject to "extensive fraud controls."

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-- David Sarno

Photo: A T-Mobile fan plays with a new smartphone. Credit: Ross Dettman / Associated Press

 
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