FTC Mobile Payment App Report: Disclose and Ask More Questions!

mobile payment app law
The FTC recently published a report on mobile payment plugins and apps. Does this mean a new mobile payment app law? Probably not; but, there are new guidelines to follow.

The Federal Trade Commission has been earning their keep lately. Hearings, investigations and workshops, oh my! One of its latest efforts is a report and recommendations on mobile payment and coupon apps/plugins. While the commission didn’t announce a new, formal mobile payment app law, it did make strong regulation suggestions — suggestions with which online marketers are legally bound to comply.

The commission’s two main conclusions:

  1. Developers and app companies aren’t doing enough to alert consumers about the liabilities associated with payment apps; and
  2. Consumers should stop using mobile payment apps that don’t feature clear and concise disclosures that appear before they download the program.

The FTC’s 2014 Review of Mobile Payment Apps and Plugins

The Federal Trade Commission concentrated on three categories of apps in both the Google Play and iTunes App stores:

  1. Price comparison apps,
  2. Deal and coupon redemption apps, and
  3. Mobile payment apps.

What were Federal Trade Commission staffers reviewing about these apps?

  1. Whether or not the app had pre-download disclosures on:
    • Procedures for fraudulent transactions,
    • Billing errors, and
    • Payment-related disputes.
  2.  Privacy Policies – Since multiple users can participate in a group buy via some mobile payment apps, FTC investigators examined the privacy policies of the reviewed applications / plugins.

What Did The FTC Discover After Reviewing Mobile Payment Apps?

  1. Most mobile payment apps didn’t feature pre-download disclosures about “issues that are important to consumers.”
  2. After downloading the apps, investigators noticed that nearly all of the associated terms of use policies “placed all liability for unauthorized charges on the consumer.”
  3. Nearly all of the reviewed apps had “strong security promises and linked to privacy policies.”
  4. Most of the apps’ privacy policies used “vague language” and allowed for the collection and third-party use of consumer data.

What The FTC Wants Mobile Payment App Developers To Do Moving Forward; A New Mobile Payment App Law?

  1. Create pre-download disclosures regarding “consumers’ rights and liability limits for unauthorized, fraudulent or erroneous transactions.”
  2. Clean up the language in their privacy policies and use plain English to explain, clearly, what data is collected and what is done with it.
  3. Better evaluate whether or not they have a valid “business need” for the data they are collecting, and do a better job of describing these “business needs” to consumers (i.e., if you’re collecting data for shady purposes, and it’s not clear in your privacy policy, the FTC may come a-knocking on your door soon).
  4. “Companies should ensure that their strong data security promises translate into strong data security practices.”

What The FTC Wants Consumers To Do Regarding Mobile Payment Apps

  1. Start “asking questions” about the mobile payment apps they use.
  2. “Consumers should look for services that tell them upfront how the payment service works and what they can do if they encounter a problem. If the information is not available, consumers should consider taking steps to minimize their liability by choosing a different payment app or funding such payments with low-dollar amounts.”

So there you have it folks, after months of researching, debating, analyzing and then writing a 40-page report on the top 25 most downloaded mobile payment apps, the FTC says:

Do not try to cheat people! Follow the Dot Com Disclosures! Oh, and consumers, start asking more questions!

And this concludes our latest installment of “How the FTC Turns.”

Sign up for our newsletter (footer) and add our RSS feed.

Do you have a mobile payment app law question? Get in touch with Internet law attorney, Aaron Kelly, with all your questions.