E-Consumer basics

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.

Trust Seals and Escrow

Click on the Seal to Learn About Your Rights!
Some online businesses are part of "seal" or "trustmark" programs that certify that a business meets certain minimum standards. You can usually click on the seal or trustmark for more information. When you click on the seal or trustmark you may find that the program offers protections like a money-back guarantee or dispute resolution services.

Look for Seal Insurance Programs
Some seal or trustmark providers offer insurance
programs through which you can get your money back if you don’t get the products or services you ordered. So, if you are unable to resolve a problem with a business, contact their seal or trustmark provider directly to see if they offer a money-back guarantee.

Look for Alternative Dispute Resolution Services
Other seal programs offer alternative dispute resolution ("ADR") services. This means that if you are unable to resolve a dispute with a business, you may use a third party to help resolve it. If a business refuses to participate in the ADR process, it may lose its seal certification.

Look for Other Protections
Seal programs are adding new protections for consumers every day. Remember to click on the seal and/or contact the seal administrator to learn about the latest methods for resolving your complaint.

Escrow Services - Holding Payment Until You are Satisfied
In addition, some companies offer escrow services through which a third party (sometimes for a fee) can hold your money until you get the goods or services you ordered. If such service is available, you should consider using it so that payment is not made until you are satisfied with your purchase.

If you are not familiar with an escrow or online payment service (even if it is recommended by the company or auction house), use these tips to determine whether the service is legitimate or not:

Read the service's terms of agreement:

Does it offer buyers any remedy if sellers don't keep
their end of the bargain?

Does it prevent sellers from accessing their funds if buyers are not satisfied with the product?

Who pays for credit card charge backs or transaction reversal requests? If the online payment service cannot recover the loss from the seller, it might try to recover the loss from you, using the credit card or bank account information on file. (Some experts say you should consider reserving a credit card, stored-value card or bank account for online transactions only.)

Check out the service's privacy policy and security measures.
Don't use the service if there are no protections for your financial or personal information. You should know why information is being collected, how it will be used, and how it will be safeguarded.

Check out the online payment or escrow service's Web site. A site of poor
quality - for example, uses misspelled words or claims that the service is affiliated with the government - is suspect.

Call the customer service line. If there isn't one - or if you call and can't reach someone - don't use the service.

Find out how the online escrow service processes transactions. Avoid sites that don't process their own, but instead require users to set up accounts with online payment services.

Payment Card Protections

Unauthorized use of your payment card

As a payment cardholder, you have many protections against the unauthorized use of your payment card (such as a debit, credit, or stored value card).

Many countries have laws that limit your liability for unauthorised transactions, and some card issuers provide additional protections voluntarily.

In some cases, you may be liable for a portion of the unauthorised charge; in others your liability may depend on when and how you notify your card issuer.

Contact your card issuer to find out what protections you have and how to use them.

What can you do if you pay with a payment card but don’t receive the product, receive the wrong product, or are billed for the wrong product?

Some countries have laws protecting payment cardholders in the event of non-delivery or delivery of the wrong item.

In some cases, card issuers provide protections (you may want to contact them to learn about these protections).

In either case, you may want to contact the merchant to try to resolve your problem directly. You can also contact the card issuer.

What happens if you buy a product with a payment card and are unhappy with the quality?

Protections against problems related to the quality of goods purchased online with a payment card are less common. The best approach is to do what you would do offline: try to resolve the issue directly with the merchant.

If you are not successful, contact your card issuer. Legal protections may apply in some countries.

You might also consider alternative dispute resolution.

What can you do if the amount on your payment card statement differs from the amount stated on the website when you made the purchase?

Contact the online merchant and ask that the discrepancy be explained or fixed.

If you are not satisfied, contact the payment card issuer by letter to ask that the discrepancy be fixed.

Read your monthly statements promptly. Keeping good records about your transactions, including print-outs of your purchase confirmation pages, should help you resolve any errors.

Alternative Dispute Resolution

If your attempts to fix a problem directly with the business are not successful, you may think that legal action is your only option. Often, however, there is a quicker and cheaper option through which you can try to resolve your dispute: using a neutral third party. This process is called alternative dispute resolution (ADR), and, increasingly, consumers and merchants are using it.

Online ADR involves a process through which you can contact an ADR provider, file your complaint online, have the other party respond online, and resolve the entire dispute from the comfort of your own home with no need to travel and at minimal cost.

If you have a dispute, be aware that some sites may require you to go through ADR before going to court; others may require you to waive your right to go to court. Check the terms and conditions of the sale first. Then, check with your local consumer protection agency to see if "mandatory" or "binding" ADR clauses are legal in your country. In the future, if you do not want to give up your immediate right to go to court, consider whether you want to do business elsewhere.

To determine whether to use ADR to resolve your dispute, consider the following questions:

What should I think about before considering ADR?
What kinds of online ADR are available?
How do I choose a particular form of ADR?
How do I choose a particular ADR provider

What should I consider before choosing to use ADR?

Before trying ADR, ask yourself the following questions:

What remedy would satisfy me?
Clearly identify what solution would be acceptable to you. For example: Do you want your money back? Do you want the product to be replaced? Do you want the business to take other action?

Have I tried to resolve the problem directly with the business myself?
Usually, the best first step is to contact the business directly. Businesses often have internal complaint handling systems that will help solve your problem quickly and efficiently.

Can my payment card issuer provide assistance?
If you paid for goods or services using a credit or debit card, you may benefit from special protections. Carefully read your payment card statements for information on contesting charges, and check with your local consumer protection agency to see whether any special protections apply in your country.

Do I suspect fraud or some other unlawful conduct?
If so, file a complaint through the econsumer.gov complaint form, and contact your national or local consumer protection or data protection authorities.

What kinds of online ADR are available?

Mediation and arbitration are common methods used in the offline world, and are increasingly available online. Automated negotiation is a new form of ADR that takes special advantage of the online environment.

What is mediation?
In mediation, a neutral third party - a mediator - helps you and the other party try to resolve the problem through facilitated dialogue. However, it’s up to you and the other party to reach an agreement. Other names for similar approaches to ADR include "assisted negotiation", "facilitation", and "conciliation".

What is arbitration?
Arbitration involves a neutral third party – an arbitrator – who gathers information from you and the other party and makes a decision. Frequently, the arbitrator’s decision is intended to be binding.

What is automated negotiation?
Automated negotiation is a computerised process, mostly designed to settle disputes over monetary amounts. It is often based on a system of blind bidding, through which the parties enter successive bids in an attempt to reach agreement, but without knowing what the other party has offered. The process concludes when the bids become sufficiently close to one another and the computer program can propose a solution. Read the terms and conditions of an automated negotiation carefully, as the outcome generated by the computer can be a legally binding contract.

How do I choose a particular form of ADR?

Some online merchants specify in their terms and conditions that a particular form of ADR will be used if there is a dispute about the transaction. Read those terms and conditions carefully, and ensure that you are comfortable with them before making your purchase. With other merchants, you may be able to initiate the ADR proceeding yourself. In thinking about which form of ADR would be best for your dispute, ask yourself the following questions to help you determine which ADR program to use.

What role do I want the third party to play?
In arbitration, the third party makes the decision. In mediation the role of the third party may vary, but your own active involvement in proposing compromises and finding solutions is essential. In automated negotiation, a solution is generated by a computer program.

Should the third party have special qualifications expertise?
Arbitrators and mediators may have formal qualifications. If your dispute is highly technical, or requires a particular area of expertise, make sure the third party has sufficient and appropriate expertise. If it is a simple dispute where, for example, you and the business disagree on the facts, formal qualifications may be less necessary. In either case, having a third party with experience in the subject matter of your dispute will be helpful.

Am I willing to be bound by the outcome?
You may be bound to obey the outcome of an arbitration, in which case you would not be able to sue the company in court. However, in some countries, consumers are not allowed to give up their right to go to court. Check with your local consumer protection or data protection agency.

How do I choose a particular ADR provider

Consider the following:

Does the provider adhere to a code of conduct or guidelines?
An ADR provider may refer to a set of guidelines or a code of conduct. Usually, this means that the ADR provider has voluntarily agreed to respect certain rules. Check the Web site of the ADR provider for details about these types of measures.

What will it cost to use this ADR programme?
Some programmes are free. Others charge a flat rate or a rate based on your ability to pay. Check the merchant’s site and the ADR provider’s site to see who will pay the ADR costs.

How long will the process take?
For most consumer transactions the process should only take a few days or weeks. However, it may take longer depending on the complexity of the transaction and/or claim. Nevertheless, ADR can often be much speedier than going to court.

Can I go through the process in my own language?
Inquire whether you can use your own language during the process. Sometimes translation may be available but inquire about the cost and availability of a translator

How will I present my case?

The actual process of communicating may take many different forms, ranging from a simple exchange of e-mails to all parties being "present" via Web cams. Consider:
1. Timing: If the problem is complex, you may want time to think, before having to respond.

2. Technology: You can send an e-mail any time from home, but can you videoconference?

3. Security: Messages sent by ordinary e-mail generally have no special security protections. The level of security needed will depend on the sensitivity of the information sent. Although many small-value disputes will not require confidentiality, you should avoid sending highly sensitive personal information in an e-mail. If the dispute itself involves highly sensitive personal information, consider using ADR programs that have secure Web pages to transmit information.

Does the provider have a privacy statement?
Consider whether the provider has a privacy statement, or otherwise indicates how your personal information will be used. Some ADR providers may ask your consent to make an anonymous version of the outcome of your dispute public. This information can be useful to other consumers evaluating whether to use a particular ADR provider and inform consumers with similar disputes about possible solutions.