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Consumer protections lagging for mobile payments, report says

Shopping on a smartphone

Most cellphone and tablet users can purchase digital goods and charge them to their monthly bill or prepaid phone account, but buyers may not get the protections they need if something goes wrong with the transaction, a new report says.

According to an analysis by Consumers Union, the protections that consumers receive vary depending on their wireless carrier's policies and what's in their cellphone contract. 

"We found that consumer rights can vary widely between wireless carriers, and the protections carriers claim to provide are often nowhere to be found in consumer contracts," said Michelle Jun, senior attorney for Consumers Union, the nonprofit advocacy branch of Consumer Reports. Jun said consumers using mobile payments should get the same "strong protections" that they receive when making purchases with a credit or debit card.

In May, Consumers Union called on the top wireless carriers to strengthen their contracts to protect consumers in the event that their phone is lost or stolen, if a merchant makes a billing mistake or the customer is not satisfied with a purchase.  

Since then, Consumers Union said it had been in touch with representatives from AT&T, Sprint, T-Mobile and Verizon Wireless to find out how they handle disputed mobile payment transactions. All four carriers said that they provided ample protections for consumers, but Consumers Union "found that the protections these carriers provide fall short" of what consumers get when they use credit cards and debit cards or when California consumers report a disputed charge on their phone accounts.  

In addition, Consumers Union said, many of the protections that wireless carrier representatives described are not disclosed in customer contracts, making it difficult to know whether consumers can count on these safeguards when problems arise.

"As new mobile payment options become available, consumers are better off sticking to services linked to credit cards or debit cards, which come with strong protections required by law," Jun said. "If wireless carriers want consumers to have confidence in direct carrier billing programs, they should strengthen their contracts with the protections consumers need."

For a Consumers Union tip sheet on mobile payments, click here

RELATED:

Visa invests in mobile payments start-up Square

PayPal acquires mobile payment start-up FigCard

Google reportedly set to test a mobile payment service

-- Andrea Chang

twitter.com/byandreachang

Photo: An iPhone user checks out a shopping app in San Francisco in November. Consumers Union says shoppers don't get the same protections when they use mobile payments to buy digital goods. Credit: Jeff Chiu / Associated Press

 
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