A Consumer's Guide
to E-Payments The
Internet has taken its place beside the telephone and television as an
important part of people's lives. Consumers use the Internet to shop,
bank and invest online. Most consumers use credit or debit cards to
pay for online purchases, but other payment methods, like "e-wallets,"
are becoming more common.
The Federal Trade Commission (FTC) wants you to know about these
payment technologies and how to make your transactions as safe and
secure as possible. Keep these tips in mind as other forms of
electronic commerce, like mobile and wireless transactions, become
more available.
And How Would You Like To Pay?
Most online shoppers use credit cards to pay for their online
purchases. But debit cards - which authorize merchants to debit your
bank account electronically - are increasing in use. Your debit card
may be an automated teller machine (ATM) card that can be used for
retail purchases. To complete a debit card transaction, you may have
to use a personal identification number (PIN), some form of a
signature or other identification, or a combination of these
identifiers. Some cards have both credit and debit features: You
select the payment option at the point-of-sale. But remember, although
a debit card may look like a credit card, the money for debit
purchases is transferred almost immediately from your bank account to
the merchant's account. In addition, your liability limits for a lost
or stolen debit card and unauthorized use are different from your
liability if your credit card is lost, stolen or used without your
authorization.
Other electronic payment systems - sometimes referred to as
"electronic money" or "e-money" - also are now common. Their goal is
to make purchasing simpler. For example, "stored-value" cards let you
transfer cash value to a card. They're commonly used on public
transportation, at colleges and universities, at gas stations, and for
prepaid telephone use. Many retailers also sell stored-value cards in
place of gift certificates. Some stored-value cards work offline, say,
to buy a candy bar at a vending machine; others work online, for
example, to buy an item from a website; some have both offline and
online features. Some cards can be "reloaded" with additional value,
at a cash machine; other cards are "disposable" - you throw them away
after you use all their value. Some stored-value cards contain
computer chips that make them "smart" cards: These cards may act like
a credit card as well as a debit card, and also may contain stored
value.
Some Internet-based payment systems allow value to be transmitted
through computers, sometimes called "e-wallets." You can use
"e-wallets" to make "micropayments" - very small online or offline
payments for things like a magazine or fast food. When you buy
something using your e-wallet, the balance on your online account
decreases by that amount. "E-wallets" may work by using some form of
stored value or by automatically accessing an account you've set up
through a computer system connected to your credit or debit card
account.
"Paying" It
Safe
The FTC encourages you to take steps to make sure your transactions
are secure and your personal information is protected. Although you
can't control fraud or deception on the Internet, you can take action
to recognize it, avoid it and report it. Here's how.
- Use a secure browser - software that encrypts or
scrambles the purchase information you send over the Internet - to
help guard the security of your information as it is transmitted to
a website. Be sure your browser has the most up-to-date encryption
capabilities by using the latest version available from the
manufacturer. You also can download some browsers for free over the
Internet. When submitting your purchase information, look for the
"lock" icon on the browser's status bar, and the phrase "https" in
the URL address for a website, to be sure your information is secure
during transmission.
- Check the site's privacy policy, before you provide any
personal financial information to a website. In particular,
determine how the information will be used or shared with others.
Also check the site's statements about the security provided for
your information. Some websites' disclosures are easier to find than
others - look at the bottom of the home page, on order forms or in
the "About" or "FAQs" section of a site. If you're not comfortable
with the policy, consider doing business elsewhere.
- Read and understand the refund and shipping policies of a
website you visit, before you make your purchase. Look closely at
disclosures about the website's refund and shipping policies. Again,
search through the website for these disclosures.
- Keep your personal information private. Don't disclose
your personal information - your address, telephone number, Social
Security number, bank account number or e-mail address - unless you
know who's collecting the information, why they're collecting it and
how they'll use it.
- Give payment information only to businesses you know and
trust, and only when and where it is appropriate - like an order
form. Never give your password to anyone online, even your Internet
service provider. Do not download files sent to you by strangers or
click on hyperlinks from people you don't know. Opening a file could
expose your system to a computer virus or a program that could
hijack your modem.
- Keep records of your online transactions and check your
e-mail for contacts by merchants with whom you're doing
business. Merchants may send you important information about your
purchases.
- Review your monthly credit card and bank statements for
any errors or unauthorized purchases promptly and thoroughly. Notify
your credit or debit card issuer immediately if your credit or debit
card or checkbook is lost or stolen, or if you suspect someone is
using your accounts without your permission.
Report Problems Immediately
The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act
(EFTA) establish protections against lost or stolen credit or debit
cards, and procedures for resolving errors on credit and bank account
statements that can include:
- credit charges or electronic fund transfers that you - or anyone
you've authorized to use your account - have not made;
- credit charges or electronic fund transfers that are incorrectly
identified or show the wrong amount or date;
- computation or similar errors;
- a failure to properly reflect payments or credits, or electronic
fund transfers;
- not mailing or delivering credit billing statements to your
current address, as long as that address was received by the
creditor in writing at least 20 days before the billing period
ended; and
- credit charges or electronic fund transfers for which you
request an explanation or documentation, because of a possible
error.
For credit: The FCBA generally applies to "open end" credit
accounts - that is, credit cards and revolving charge accounts, like
department store accounts. It does not apply to loans or credit sales
that are paid according to a fixed schedule until the entire amount is
paid back, like an automobile loan.
Lost or stolen credit cards: Under the FCBA, your liability for
lost or stolen credit cards is limited to $50. If the loss involves
only your credit card number (not the card itself), you have no
liability for unauthorized use. It's best to notify your card issuer
promptly upon discovering the loss. Many companies have toll-free
numbers and 24-hour service to deal with such emergencies. Always
follow up with a letter and keep a copy for your records.
Billing errors: The FCBA's settlement procedures apply to
disputes about "billing errors" for open-end accounts, including
unauthorized charges (you cannot be liable for more than $50 for
unauthorized credit charges); charges for goods or services you didn't
accept or weren't delivered as agreed; charges that are incorrectly
identified or show the wrong amount or date; math errors; a failure to
properly reflect payments or credits; not mailing or delivering credit
billing statements to your current address, if the address was
received by the creditor in writing at least 20 days before the
billing period ended; and charges for which you request an explanation
or documentation, because of a possible error.
To take advantage of the FCBA's consumer protections for errors on
your account, write to the creditor at the address given for "billing
inquiries," not the address for sending your payments. Include your
name, address, account number and a description of the billing error.
Send your letter so that it reaches the creditor within 60 days after
the first bill containing the error was mailed to you. And if you send
your letter by certified mail, return receipt requested, you'll have
proof that the creditor received it. Include copies (not originals) of
sales slips or other documents that support your position. Keep a copy
of your dispute letter.
The creditor must acknowledge your dispute in writing within 30 days
after it is received, unless the problem is resolved within that
period. The creditor must con-duct an investigation and either correct
the mistake or explain why the bill is believed to be correct, within
two billing cycles (but not more than 90 days), unless the creditor
provides a permanent credit instead. You may withhold payment of the
amount in dispute and any related finance charges and the creditor may
not take any action to collect that amount during the dispute.
For debit: The EFTA applies to electronic fund transfers -
transactions involving automated teller machines (ATMs), debit cards
and other point-of-sale debit transactions, and other electronic
banking transactions that can result in the withdrawal of cash from
your bank account.
Lost or stolen debit cards: If someone uses your debit card, or
makes other electronic fund transfers, without your permission, you
can lose from $50 to $500 or more, depending on when you report the
loss or theft. If you report the loss within two business days after
you discover the problem, you will not be responsible for more than
$50 for unauthorized use. However, if you do not report the loss
within two business days after you realize the card is missing, but
you do report its loss within 60 days after your statement is mailed
to you, you could lose as much as $500 because of an unauthorized
withdrawal. And, if you do not report an unauthorized transfer or
withdrawal within 60 days after your statement is mailed to you, you
risk unlimited loss. That means you could lose all the money in your
account and the unused portion of your maximum line of credit
established for overdrafts.
Some financial institutions may voluntarily cap your liability at $50
for certain types of transactions, regardless of when you report the
loss or theft; because this is voluntary, their policies could change
at any time. Ask your financial institution about its liability
limits.
EFT errors: The EFTA's error procedures apply to certain
problems. This can include:
- electronic fund transfers that you - or anyone you've authorized
to use your account - have not made;
- incorrect electronic fund transfers;
- omitted electronic fund transfers;
- a failure to properly reflect electronic fund transfers; and
- electronic fund transfers for which you request an explanation
or documentation, because of a possible error.
To take advantage of the EFTA's error resolution procedures, you
must notify your financial institution of the problem not later than
60 days after the statement containing the problem or error was sent.
Although most financial institutions have a toll-free number to report
the problem, you should follow-up in writing. For retail purchases,
your financial institution has up to 10 business days to investigate
after receiving your notice of the error. The financial institution
must tell you the results of its investigation within three business
days of completing its investigation. The error must be corrected
within one business day after determining the error has occurred. If
the institution needs more time, it may take up to 90 days, in many
situations, to complete the investigation - but only if it returns the
money in dispute to your account within 10 business days after
receiving notice of the error, while it reviews your concerns.
For stored-value: The FCBA and the EFTA may not cover
stored-value cards or transactions involving them, so you may not be
covered for loss or misuse of the card. However, stored-value cards
still might be useful for micropayments and other small purchases
online because they can be convenient and - in some cases - offer
anonymity. Before you buy a stored-value card or other form of
e-money, ask the issuer for written information about the product's
features. Find out the card's dollar limit, whether it is reloadable
or disposable, if there's an expiration date, and any fees to use,
reload or redeem (return it for a refund) the product. At the same
time, ask about your rights and responsibilities. For example, does
the issuer offer any protection in the case of a lost, stolen,
misused, or malfunctioning card, and who do you call if you have a
question or problem with the card?
For More Information
Your financial institution, local consumer protection agency and law
enforcement agencies like the Federal Trade Commission or your state
Attorney General are among the many organizations working to help
consumers understand electronic commerce and new online payment
options.
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
www.ftc.gov or
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
complaints into
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
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FEDERAL TRADE COMMISSION |
FOR THE CONSUMER |
1-877-FTC-HELP |
www.ftc.gov |
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March 2003
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