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The laws, regulations, and industry practices that protect consumers who use electronic payment systems: policy considerations

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  • Mark Furletti

Abstract

This is the third in a series of three papers that examines the laws, regulations, and voluntary industry practices that may aid consumers who contest an electronic transaction because of error, fraud, or merchant dispute. The first two papers describe the complex web of protections available to users of four popular electronic payment mechanisms: credit cards, debit cards, prepaid cards, and ACH e-checks. This third paper considers how protections related to fraud, error, and disputes affect market participants. The paper concludes that (i) the current protection mechanisms make it more difficult to encourage the adoption of fraud-reduction schemes, (ii) the current protections represent a significant cost to banks, merchants, processors, and consumers, and (iii) the present federal system of protection, while encouraging innovation and thoughtful regulation, leads to consumer confusion.

Suggested Citation

  • Mark Furletti, 2005. "The laws, regulations, and industry practices that protect consumers who use electronic payment systems: policy considerations," Payment Cards Center Discussion Paper 05-16, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpdp:05-16
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    File URL: http://www.phil.frb.org/pcc/papers/2005/cppolicy-102005.pdf
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    References listed on IDEAS

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    1. Jialan Wang & Benjamin Keys, 2014. "Perverse Nudges: Minimum Payments and Debt Paydown in Consumer Credit Cards," 2014 Meeting Papers 323, Society for Economic Dynamics.
    2. Richard H. Thaler, 2008. "Mental Accounting and Consumer Choice," Marketing Science, INFORMS, vol. 27(1), pages 15-25, 01-02.
    3. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
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    Cited by:

    1. Creti, Anna & Verdier, Marianne, 2014. "Fraud, investments and liability regimes in payment platforms," International Journal of Industrial Organization, Elsevier, vol. 35(C), pages 84-93.

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    Keywords

    Payment systems ; Fraud ; Consumer protection;

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