Linking a mobile phone or Internet account to a credit card offers limited protections, but more than many carriers’ contracts. Account holders should consider linking their mobile accounts to a credit card until carriers’ contracts and state laws offer more security. Federal law requires cardholders to be liable for only $50 for a fraudulent charge on a credit card. Cardholders may be liable for only $50 on a debit or ATM card if the charge is reported within two business days. After that, the amount shoots up to $500. Prepaid calling and Internet cards are not good options. Federal law allows them to offer even fewer protections than credit or debit/ATM cards.
Recently, consumer groups such as Consumers Union, a national non-profit organization, have called on Congress for better protections for accountholders. In late March 2012, Suzanne Martindale, a staff attorney for Consumers Union, asked the Consumer Financial Protection Bureau to regulate carriers more heavily. Martindale spoke before the House Subcommittee on Financial Institutions in the first of a three-part series that will culminate this spring.
The major concern is that carrier contracts leave considerable room for accountholders to suffer charges from third-party “cramming.” “Cramming” refers to the placement of unauthorized charges on an account. A crammer can purchase a wide variety of items from a carrier, such as minutes, ringtones, Internet service, or international phone service. A crammer is able to make purchases using an accountholder’s information after accessing a device that has been lost, abandoned, or stolen. A crammer can also hack programs on a device that are currently in use.
Accountholders bear the losses of cramming because they are unaware it is taking place. Many accountholders do not review their bills to look for unauthorized charges. If a bill has a complicated layout, that adds to the problem. Crammers work hard to make their schemes seem legitimate. Some crammers charge a low amount. Other crammers label the charge so it appears to be part of the accountholder’s regular plan. Still other crammers encourage an accountholder to dial or text a 900 number.
Recently, crammers have engaged in a scam that sending texts and emails which encourage accountholders to claim prizes on websites. The sites ask the accountholders to enter commonly used usernames and passwords as well as personal and financial information. Crammers are also building and transmitting malicious programs called “malware.” Malware can take the form of games or work-related applications. Malware has the ability to repeatedly pinpoint an accountholder’s location, gather information from a list of contacts, and copy all text messages.
The concern over carrier contracts is likely to increase. Internet giants such as Google are encouraging accountholders to adopt devices and programs that act as “digital wallets.” With a swipe of a phone or tablet, a mobile device will be able to pay a store charge. Applications such as Google Wallet are still not widely in use. They are likely to become more popular as newer smartphones are built to incorporate Near Field Communication (NFC) technology.
© April 1, 2012 // Copyright all material 4/1/2012 by Jessica Zimmer