BBB Warns Shoppers to Choose Shopping Apps Carefully According to FTC Recommendations

Better Business Bureau says consumers should be selective before downloading mobile shopping applications (apps), in the wake of a report from the Federal Trade Commission (FTC).

The FTC staff report, “What’s the Deal? An FTC Study on Mobile Shopping Apps” finds that several categories of mobile apps it studied failed to provide adequate information about how users’ personal information would be shared, as well as details about payment dispute mechanisms.

FTC settlements involving Fandango and Credit Karma illustrate how companies and application developers are not necessarily doing all they should to safeguard their customers. According to the FTC complaints, the companies allegedly disabled a standard security process in their apps, leaving customers’ credit card information and Social Security numbers vulnerable to interception.

The FTC report looked at more than 120 of the most popular shopping apps from Google Play and the Apple App Store that are used to comparison shop, obtain store discounts and make in-store payments with their mobile devices. The FTC’s Bureau of Consumer Protection expressed concern that the apps it reviewed often failed to disclose information about consumers’ potential liability for erroneous or unauthorized charges and dispute procedures.

Mobile applications are playing an increasingly wider role in business transactions, and should provide consumers with the same transparency and disclosures as reputable websites and retail outlets.

In addition, the Commission found that the apps’ privacy disclosures were vague, and reserved rights to collect, use and share consumers’ information without restriction.

Given the staff report’s findings, Better Business Bureau recommends consumers carefully read all terms and conditions before using any mobile applications, and be aware that, in the absence of those disclosures, there is the potential for unauthorized information-sharing and problems with disputes about incorrect or fraudulent charges.

From the FTC:

In light of these findings, staff makes the following recommendations to companies that provide mobile shopping apps to consumers:

• First, when offering consumers the ability to make payments through mobile devices, companies should disclose consumers’ rights and liability limits for unauthorized, fraudulent, or erroneous transactions.
• While a few of the in-store purchase apps that staff reviewed extended liability-limiting protections to consumers through pre-download representations, many provided no such disclosures.
• Some placed all liability for unauthorized charges on the consumer. Consumers should be able to know what their potential liability is for unauthorized transactions, what, if any, protections are available based on the method of payment, and whether procedures are available for resolving disputes, before committing to use one of these services.

Staff also makes recommendations to consumers that use shopping apps. Specifically-

• Consumers should look for the dispute resolution procedures and liability limits of the apps they download, and consider the payment methods used to fund their purchases
• Federal law currently limits consumers’ liability for unauthorized transactions made with their credit or debit cards, but does not limit liability for prepaid cards or accounts such as gift or general purpose reloadable (“GPR”) cards. Thus, if an unauthorized charge is made or if something goes wrong with a transaction funded by a prepaid card or through an app account with a pre-funded balance, consumers might not have any recourse. If consumers cannot find information about the dispute resolution procedures and liability limits of an in-store purchase app prior to download, they should consider downloading an alternative app, or making only small-dollar purchases.
• Likewise, consumers should seek information before they download apps about how their data will be collected, used, and shared.
• If consumers cannot find this information, or are uncomfortable with what they find, they should look for a different app or consider taking steps to minimize their exposure by limiting the personal and financial data they provide.