NBPCA, Gov’t, Consumer Groups Weigh In on Mobile Financial Services (Sept. 15, 2014)
Mobile financial services (MFS) can play an important role among a large group of American consumers. That much the Network Branded Prepaid Card Association (NBPCA), the FTC and consumer organizations, including U.S. Public Interest Research Group (U.S. PIRG) and the Center for Digital Democracy, agree on in their written responses to a request for information by the CFPB regarding consumer MFS. Where the other organizations differ is how much MFS need to be regulated.
The use of MFS is increasing across all demographics, and this trend will continue as Millennials and Gen Xers (consumers between the ages of 18 and 48) replace previous generations, the NBPCA wrote. Furthermore, smartphone ownership among households with incomes less than $30,000 is approaching 50 percent. Underbanked consumers in the U.S. often have insufficient access to financial services, but their access to mobile phones is fairly widespread. Thus, the smartphone might be the most cost-effective way to acquire Internet connectivity.
“The availability of financial services through mobile devices should be regarded as a tremendous opportunity to use a popular delivery channel to enfranchise individuals across all ages and economic circumstances,” the NBPCA said in its letter. MFS “also mark an exciting and important change in consumer protection for financial services” because they provide consumers faster access to data about their card accounts and transactions, and consumers are better able to detect unauthorized transactions more quickly.
U.S. PIRG and the CDD wrote that the convenience and capabilities of mobile devices provide financially at-risk, unbanked consumers opportunities to save money on banking transactions and payments, build financial resources and make more effective decisions on purchasing. They urge the CFPB, however, to scrutinize features and characteristics of MFS, such as targeted promotions—for predatory loans, for example—and privacy and security concerns, among other issues. The FTC also is concerned about the privacy and security of consumers’ personal and financial data, in addition to potential liability for unauthorized charges, unfair billing practices on mobile carrier bills and the potential use of consumers’ information by data brokers and other third parties, according to its written response.
“The CFPB has a short window to ensure that the public receives the necessary consumer safeguards, especially for financial applications and their privacy, as they increasingly rely on mobile devices for banking, payments, credit applications, shopping, e-commerce and other services,” Ed Mierzwinski, U.S. PIRG consumer program director, said last week.
Conversely, the NPBCA is cautioning the CFPB from placing unnecessary burdens on the growth and evolution of MFS. “More likely than not, additional consumer regulations in this area will simply stifle the industry in its rapidly-growing effort to provide consumers with more control over their finances and to offer more cost-efficient and expedient financial services via mobile.”
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