CFPB Reports on Underserved Consumers’ Use of Mobile Financial Services

On November 5, the CFPB published a report titled “Mobile Financial Services” to summarize the results of its June 2014 Request for Information on the opportunities and challenges associated with the use of mobile financial services (MFS) by traditionally underserved consumers. With 44% of unbanked individuals owning a smartphone, the report notes that MFS has the potential to be a promising tool for underbanked and unbanked consumers to manage their finances. According to the report, consumers using MFS save time and money because they can check their balances any time and have access to certain tools that help them manage their money. The report highlights mobile Remote Deposit Capture as particularly attractive to unbanked consumers because it allows them to take a picture of and deposit checks remotely, reducing the limitations of branch hours and locations. Additional key takeaways from the report include: (i) MFS would likely be most effective for underserved consumers if paired with consultative or assistance services; (ii) privacy and security concerns remain a significant risk; and (iii) digital access and digital financial literacy need improvement, such as enhancing affordable access to technology and educating consumers and intermediaries about safe and effective use of the technology.

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Mobile App Developer Settles with FTC and New Jersey AG Over Virtual Currency Mining

On June 29, a mobile app developer entered into an agreement with the FTC and the New Jersey AG to settle allegations that the developer engaged in deceptive and unfair practices by marketing its rewards app, called “Prized,” as being free of malicious software, also known as “malware.” However, according to the FTC, the true purpose of the mobile app was to uploaded malware onto consumers’ mobile devices capable of mining virtual currencies for the software developer.  This process allegedly reduced the battery life of consumers’ devices and caused consumers to burn through their monthly data plans. Under terms of settlement, the developer and accompanying mobile app are (i) prohibited from creating and distributing malicious software, and (ii) required to pay $50,000 to the state of New Jersey, with $5,200 due immediately, and the remaining $44,800 payable if the developer fails to comply with the terms of the consent order or the New Jersey Consumer Fraud Act within three years of the order.

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Digital Insights & Trends: Can Mobile Payments Solve the “Unbanked” Problem?

Margo Tank, Head of Digital Commerce PracticeWhile 2014 is closing out with worldwide cyber-threats, at BuckleySandler, we’re going to close out our first year publishing Digital Insights & Trends on an optimistic note. Looking forward, we welcome a mobile payments development that could be cause for cyber-celebration in 2015 and the years to follow.

As financial services lawyers, we usually navigate the regulatory concerns of e-commerce providers in the financial sector for a clientele of banks, other financial institutions and technology companies. But we are keenly aware that access to financial services is vital even for those without access to traditional banks. This reality, referred to as the “unbanked” problem, has preoccupied financial service providers (and consumer advocates, and policymakers) for decades. Mobile payment technology may be the solution. Read more…

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Digital Insights & Trends: There’s an App for That – But Is It Legal?

Margo Tank, Head of Digital Commerce Practice

The “sharing economy” is an e-commerce darling, making household names of companies like Airbnb and Lyft, with lesser-known businesses such as RelayRides and MoneyParking emerging daily. Also called the peer-to-peer business model, the digital sharing economy was estimated at $26 billion in a 2013 Economist article, with Forbes estimating 25% annual growth. Its benefits have been touted by the public, some politicians and the press, and range from reduced environmental impacts and information asymmetry to increased social and trust communities, in addition to financial rewards for consumers on both sides of the sharing transaction.

While legions of users connect to car-sharing, home-sharing, parking-sharing and goods-sharing sites through smartphone apps, legal challenges pile up, because some aspects of the sharing economy aren’t strictly legal. Consider, for example, the subpoena from New York Attorney General Eric Schneiderman to accommodation-sharing site Airbnb, based on Schneiderman’s claim that most Airbnb hosts are violating a law prohibiting subletting homes for less than 30 days. In his April op-ed in the New York Times (“Taming the Digital Wild West”), Schneiderman also says Uber may be violating state laws on price gouging. Read more…

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FTC Finalizes Mobile Application Privacy Settlements

On August 19, the FTC approved final orders resolving allegations that two companies: (i) misrepresented the level of security of their mobile applications; and (ii) failed to secure the transmission of millions of consumers’ sensitive personal information. The FTC alleged that one company’s application assured consumers that their credit card information was stored and transmitted securely even though the company disabled a higher level of security validation, which allowed such credit card information to be intercepted. In addition, the company allegedly failed to have an adequate process for receiving vulnerability reports from security researchers and other third parties. The FTC alleged that the second company also disabled enhanced security validation despite claiming that it followed industry-leading security precautions, which also left consumers’ information vulnerable to interception. The final settlement orders require both companies to establish comprehensive programs designed to address security risks during the development of their applications and to undergo independent security assessments every other year for the next 20 years. The settlements also prohibit the companies from misrepresenting the level of privacy or security of their products and services.

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