T-Mobile's new cell phone payment system criticized by consumer advocates
August 11, 2011
T-Mobile will soon unveil a new smartphone-based system that allows consumers to purchase items off the Internet and charge them to their phone bills, but Consumers Union is warning that the billing method lacks the same consumer protections that credit cards have.
CU, the publishers of Consumer Reports, says T-Mobile's Direct Carrier Billing system could leave consumers on the hook for merchant mistakes, fraudulent purchases and charges resulting after a smartphone has been lost or stolen. Under T-Mobile's contract, customers who refuse to pay unauthorized charges could be subject to late charges or collection fees.
Why credit cards are safer
CU has been warning consumers for months about the flaws of mobile payment charges that appear directly on a customer's cell phone bill. Several companies provide the increasingly popular service, and those charges do not have the same statutory protections consumers have when using a credit card or debit card.
For instance, when you link mobile payments to a credit card, you are liable for no more than $50 if you are overcharged or if someone steals your phone and makes unauthorized charges. If there is a billing error, you aren't liable at all if you report it within 60 days. Federal regulations protect you from charges on your credit cards that you didn't authorize.
If you link your mobile charges to a bank account or a debit card, you are also limited to $50 in losses if you lose your phone and someone makes unauthorized charges. You have to report the lost phone within two business days of the unauthorized transactions, however, or your liability can go up to $500. There are no protections under federal law if the goods you purchase are defective or aren't delivered, and if you spot a bank statement error, you have 60 days to report it.
Mobile payments are riskier without credit cards
Mobile payments linked to your phone bill, however, don't carry the same protections, and any credit or liability for unauthorized purchases often depend on the goodness of your carrier. CU, in a report issued in June, said some companies, such as Boku, which provides a mobile payment service called Paymo, don't allow you to challenge any transactions. If you get unauthorized charges on your cell phone bill, you can take the matter up with your wireless carrier, but you have no guaranteed protections.
Some states offer consumer protections on cell phone bills, but California is the only state that specifically provides consumer protections for mobile payments made to mobile phone accounts. In that state, you can reverse the charges for unauthorized transactions, just like on your best credit card, and the phone company has to prove you authorized it. You don't have to pay for any contested charges during an investigation.
Copying the best credit card protections
CU would like to see wireless carriers like T-Mobile provide the same level of protections as the best credit cards. It would also like to see states follow California's lead and allow you to withhold paying for unauthorized mobile payments charged to your cell phone bill, just as you can on your bank credit card.
In the meantime, if you want to charge mobile purchases to your cell phone bill, make sure you read your wireless contract carefully. Six of the 18 carrier contracts reviewed by CU said nothing about disputed charges, and the remaining 12 all have different requirements for notifying the carrier of fraudulent charges.