Mobile Payments and Mobile Payments and 

Economic Inclusion: Issue

Economic Inclusion: Issue

for Consumers for Consumers

Federal Deposit Insurance CorporationDecember 1, 2011

Suzanne Martindale Suzanne MartindaleStaff Attorney, West Coast Office Staff Attorney, West Coast OfficeConsumers Union of U.S., Inc. Consumers Union of U.S., Inc.http:// http://www.defendyourdollars.org/money_topics.html
The Rise of Mobile Payments The worldwide market for mobile paym

totaled over $68 billion in 2009

 Expected to reach over $630 billion by  Mobile payments in the U.S. are expec

reach $214 billion by 2015, up from $1billion in 2010 - a projected increase of 1200% in only five years
Ways to Make Mobile Payments SMS text message (e.g. Red Cross 

donations)

 NFC chips

 NFC sticker affixed to phone (Bling Nation Chip embedded in phone hardware (ISIS, 

Wallet)

 Smartphone application downloaded to 

phone (PayPal app)

 Smartphone web browser
Ways to Fund Mobile Payments

 Pay later – link to credit card or pho Pay now – link to debit card or ban

account number

 Pay in advance – link to prepaid ca

card or prepaid deposit held by wircarrier
Is my money safe?

 Data privacy – is my financial informa

stored on the phone?

 Consumer protection laws – can I get 

money back?

 Trust account issues for deposits give

wireless carriers
Is my money safe? Are prepaid deposits to wireless carrie

up to be insured?

 In the U.S., funds in a pooled account 

meet FDIC “pass-through” requiremenindividually insured

 If consumers without bank accounts gi

deposits to wireless carriers, they coulrisk of losing precious funds if the comgoes under
Consumer Protection: Credit Car

 If you link a mobile payment to a credit c

you get mandatory protections under TIReg Z

 $50 limit on liability for unauthorized use Right to reverse “billing errors,” including dis

with a merchant about delivery or acceptabigoods

 This is called a “chargeback” right
Consumer Protection: Debit Car If you link a mobile payment to a debit ca

bank account, you get mandatory protectunder EFTA and Reg E

 $50 limit on liability for unauthorized transacti

caused by lost/stolen phone if you report withbusiness days (up to $500 or more thereafter)

 No liability if you report an error in your period

statement within 60 days

 Right to be credited missing funds within 10 b

days

 BUT: no chargeback rights
Consumer Protection: Prepaid/Gift  If you link to a prepaid or gift card, you 

have any guaranteed protections

 Gift card laws don’t give you protections a

loss of funds

 Prepaid card contracts may have protectio

they are voluntary and subject to change
Consumer Protection: Direct-to-MoBilling Federal level: if you link directly to your prep

billing cycle phone account, your protections unclear

 TILA and EFTA don’t explicitly address direct-to-m

payments

 However, these types of payments could be cove

clarifying Reg Z and Reg E

 State level: varies by state

 One state, CA, has public utilities regulations that 

strong protections to residents who make direct-topayments, including a chargeback right
What about telephone consumer law

 FCC does not appear to have jurisdiction ove

payments

 Its “truth-in-billing” regulations apply only to “teleph

services”

 Too many players – wireless carriers, payme

processors, financial institutions, etc. 

 Too much room for finger pointing Compare the simplicity of the EFTA approac

 Entity who paid out the funds has to investigate

and return funds within 10 business days unless investigation concludes against the consumer.
Wireless Contracts

 Consumers Union recently surv

18 major wireless plans

 None of the contracts provided 

protections as strong as those for or debit cards

 Most required consumer to pay fo

disputed charges resulting from lost/stolen phone or error
Social Policy Issues

 Why should you need a credit c

get the best consumer protectio

 Are consumers without bank ac

more vulnerable to losing mone
Practical and Regulatory Issues  CFPB has important role to play As of July 21, 2011, CFPB has rulema

authority under EFTA and TILA

 CFPB can clarify Reg E and Reg Z

 CFPB has jurisdiction over “payment 

providers”
Policy Recommendations Clarify Reg E to cover prepaid deposits

 Is a prepaid deposit to the wireless carrier any diff

a “consumer asset account”?

 Should prepaid deposit holder be required to get b

license and meet deposit insurance requirements

 Clarify Reg Z to provide “chargeback” rights/Fai

Billing Act rights for charges to phone bill

 Is a billing cycle plan any different than an “open-e

plan, where the phone acts like a “charge card”?

 States can follow California’s approach Limit size and complexity of contracts
Policy Recommendations Provide uniform protections in wireless co

regardless of how consumer links the mopayment

 Allow customer-set individual transaction 

caps and daily limits.

 Allow customers to choose who can rece

funds or initiate transaction to/from phone 
Resources  Report, Mobile Pay or Mobile Mess: Closing the 

Between Mobile Payment Systems and ConsumProtections: http://www.consumersunion.org/pdf/MobileMobile-Mess.pdf

 Article, Pay at Your Own Risk? How to Make Ev

to Pay Safe for Mobile Payments: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1787

 Cal. Pub. Util. Comm’n, Order Instituting Rulema

the Commission's Own Motion to Establish ConRights and Consumer Protection Rules ApplicabTelecommunications Utilities (Oct. 28, 2010): http://docs.cpuc.ca.gov/PUBLISHED/FINAL_DECISION/1