PSA action to protect consumers from harm
12 September 2019
Series of changes and actions from regulator to protect consumers
- Charges for subscription-based phone-paid services coming into force in November
- New consent to charge requirements currently being consulted on
- Ban from market and £600,000 fine for Veoo Ltd, a payment platform provider
We’ve taken action in the last few months to further protect consumers from harm, particularly by acting to reduce the risk of unwanted or inadvertent charges.
First, we introduced new regulatory requirements for subscription services – services which make recurring charges to a phone bill in exchange for content like games, videos and music.
These requirements include a two-stage sign-up process, with opt-in generally using either a PIN, account and password or Mobile Originating SMS, greater clarity in ensuring that consumers are aware they are in a payment environment and signing up to a phone-paid subscription, and receipts after every charge.
The intention here is to ensure that consumers know what they are signing up for and are properly informed to enable them to opt-in or opt-out of charges. Research from Jigsaw told us that this is what consumers expect. It’s also in line with existing practice, both from many popular operators of phone-paid services, and other payment types.
Second, we’ve worked with the Mobile Network Operators and independent digital security experts to ensure that platform security remains high throughout the industry. We’re now consulting on Guidance to clarify our expectations around this for the benefit of networks and phone-paid services providers in particular.
The Guidance covers three key areas: why informed and robust consent is important, expectations around informed consent and consumer purchase journeys and expectations around robust payment and verification platforms.
The principle of clear and informed consumer consent is essential to any business and is at the heart of the PSA Code of Practice. If service providers are charging consumers without clear consent in exchange for phone-paid services, then this is a serious concern.
Over 90% of complaints made to the PSA in the past few years have been about phone-paid subscription services, many of them citing lack of consent as an issue.
Third, we’ve taken Veoo, a platform provider and aggregator, to a Tribunal which issued significant sanctions for failings in due diligence, risk assessment and control and providing false or misleading information to the PSA. The sanctions include a £600,000 fine and a two-year ban from operating in the UK phone-paid services market.
Veoo failed to prevent other companies they contracted with from charging consumers without their consent. Eight of these companies had previously been sanctioned by the PSA, and the Tribunal found that Veoo had failed to undertake proper due diligence risk assessment and control in respect of them and had provided false or misleading information to the regulator.
This case is of major significance for the phone-paid services industry and aims to not only reinforce the importance of proper due diligence and risk assessment and control processes for platform providers, but also to dissuade them from permitting non-compliant service providers to enter the market at source. It also dissuades them from providing false or misleading information to the PSA.
Payment platform providers and aggregators facilitate phone payment. They act as intermediaries to enable providers of content, goods and services to bill consumers via their phone bills without the provider having to have a direct contractual relationship with the phone company itself.
It is their responsibility to ensure that they are contracting with compliant service providers and not facilitating consumer harm via their platform. Sanctions against Veoo demonstrate among other things the importance of due diligence throughout the phone-paid services market and send a clear message to industry about what we consider good practice from the consumer point of view.
Collectively, these three major pieces of work should raise standards and advance the consumer interests within the market. This, in turn, helps the reputation of phone-paid services, which as demonstrated in our Annual Market Review of 2018/19 showed robust and sustainable growth, especially in operator billing by major brands, showcasing the immense potential for consumers and for service providers.