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FTC?s carrier billing report impacts burgeoning mobile payments methods

A new report from the Federal Trade Commission has implications for the mobile payments industry by calling out growth areas such as direct carrier billing and charges billed through a mobile application or site.

While carriers have been moving away from premium SMS in the wake of a crackdown on the problem of unauthorized charges appearing on consumers? mobile phone bills, the report notes that the recommended consumer protections should apply to direct carrier billing or any other mechanism for placing third-party charges on mobile phone bills. Since the mobile payments area is still nascent and quickly evolving, this means that payments providers need to be aware of the FTC recommendations.

?The industry is creative, mobile as being the ubiquitous device that is used for content and for billing, that is only going to continue to grow,? said Linda Goldstein, chair of the advertising, marketing and media division at Manatt Phelps & Phillips. ?The principals that are in here will be important principals that will still have relevance in the future.

?The FTC specifically called out charges that are placed either with direct carrier billing or charges that are billed through a mobile app or a mobile site,? she said. ?That is where the industry is moving.

?I think that has enormous implications because that is an area that is just beginning to be developed.?

Blocking third-party charges
The FTC is urging in a new report released yesterday that wireless carriers give consumers the right to block all third-party charges on their phones, following what it says is a trend toward direct carrier billing.

The trend toward direct carrier billing has been in evidence since wireless carriers began moving away from premium SMS billing, according to the FTC. However, consumer protections against cramming should apply to any method of placing third-party charges on a mobile phone bill, the agency insists.  

Enabling mobile users to charge the cost of digital content, charitable donations and other transactions to their phone bill is a growing and legitimate industry. Carrier billing is also used in some real-world use cases, such as parking and tickets. 

However, consumers have often found unauthorized charges on their bills in a practice known as mobile cramming. 

The FTC, while acknowledging that the full scope of mobile cramming is not known, reports that three cases it brought last year led to more than $160 million in judgments.

Cramming is not the problem it once was thanks to the effort of the FTC and others, per Ms. Goldstein. 

Five steps
The FTC?s report, ?Mobile Cramming: An FTC Staff Report,? recommends five steps for carriers, billing aggregators and merchants to take in order to protect consumers from being stuck with unauthorized charges on their mobile phone bills.

In the first, the FTC urges mobile phone carriers to give consumers the right to completely block third-party charges and to inform them of this right clearly and prominently. 

Next, the FTC recommends that the processes for these charges are clear about how much and how often a consumer will be charged. 

Additionally, consumers? express, informed consent should be obtained before placing charges on a phone bill, per the report.

Mobile phone bills should clearly and conspicuously show third-party charges, the report goes on to say. The FTC also urges carriers to consider steps to make third-party charges more prominent on bills.

Finally, the FTC recommends that carriers put in place an effective dispute resolution process. The report goes on to say that consumers have said they often have a difficult time getting a refund for unauthorized charges.

A consistent message
The recommendations themselves are not groundbreaking; the significance lies in how they could be applied going forward.

?There is nothing new in these principals,? Ms. Goldstein said. ?It was the same when 900 numbers were in vogue.

?The FTC has delivered a consistent message through all of these iterations; there is a concern when charges for non telephony or mobile or data transactions are placed on a consumer?s bill,? she said. ?As a result, they believe that consumers don?t always have an understanding or expectation of how these work.  

?Mobile payments don?t carry the same protections as credit cards. They are considered a novel payment method. The FTC is saying you need to make sure consumers really understand how these are working.? 

Final Take
Chantal Tode is senior editor on Mobile Marketer, New York