The consumer protection group says T-Mobile's recent decision to let small purchases be tacked onto the phone bill leaves customers vulnerable to fraud or merchant mistakes.
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T-Mobile USA customers who purchase digital goods online and opt to have the charge show up on their phone bill are vulnerable to fraud, according to Consumers Union.
The consumer advocacy group said today that the carrier's mobile-payment plans aren't covered by standard protections that guard against fraud with credit or debit card charges.
"Mobile payment products promise a new, convenient way to pay but consumers could end up losing money if something goes wrong with their transaction," said Michelle Jun, senior attorney for Consumers Union, in a statement.
As the technology industry salivates over the prospect of mobile payments, consumers are still hesitant to jump in due to privacy and security concerns.
A Consumers Union representative said that carrier billing suffers from vulnerabilities because the rules that guard against fraud or merchant errors aren't strong enough to protect the customer. Payments that show up on the phone bill don't enjoy the same statutory protections as a credit card bill. That's particularly relevant with digital merchants who don't have a physical storefront to resolve disputes over improper charges.
Consumers Union noted that if the mobile transactions are linked to a credit card or debit card, consumers are entitled to the same federal protection that apply to the credit and debit card industry. But mobile charges don't enjoy the same benefits, and the consumer advocacy group said "the protections were lacking."
T-Mobile's move was the latest development in the mobile-payments area, and followed a similar announcement by Verizon, which partnered with American Express for mobile payments made on the phone. Likewise, Verizon's embrace of carrier billing could leave consumers vulnerable, according to Consumers Union.
The group urged the carriers to put stronger protections in their contracts. It would go a long way to addressing the concerns over the security of mobile payments.
"If wireless carriers expect consumers to feel comfortable using mobile-payment services, they need to provide at least the same level of protections that come with credit cards," Jun said.