The US Federal Trade Commission (FTC) has penned a new blog post aiming to give advice to consumers who may pay for products with digital currencies such as bitcoin.

Written by Kristin Cohen of the FTC’s Office of Technology Research and Investigation, the post outlines the types of complaints the US agency receives in relation to the emerging technology.

According to the FTC, these are the most often-cited issues with merchants who accept bitcoin and other digital currencies:

“The FTC has received hundreds of complaints involving bitcoins and other virtual currencies. The two most common problems? Online merchants who don’t deliver the product on time — or at all — and merchants who give refunds in store credit, rather than currency.”

The post was released with an infographic that sought to illustrate this pain point, showcasing a return process where a consumer spends $100 in bitcoin, only to be refunded $75 due to the fluctuating value of the digital currency.

Cohen goes on to recommend that those who buy items with bitcoin first check the seller’s reputation before exploring how the payment will be processed by the merchant.

“If you pay with bitcoins, the only way to get a refund is through the seller or payment processor, so it’s important to choose companies you trust,” the post states.

Refund and return

One common problem, the FTC suggests, is the differing ways merchants that accept bitcoin handle the refund process.

Accordingly, Cohen recommends US consumers determine the merchant’s policies regarding damaged goods, the exchange rate that will be used for refunds and how the refund will be processed before proceeding with a sale.

“Because people can change their virtual wallet accounts, a seller can’t always send a bitcoin back to the wallet it came from,” the agency cautions.

The FTC also instructs consumers to ask how their financial information will be protected given the wallet addresses that execute bitcoin transactions will be available in the technology’s public ledger, the blockchain.

“If the seller uses a payment processor, check its privacy policy, too. A recent FTC report found many shopping apps had privacy policies that included broad rights to collect, use, and share data,” she continues.

The post concludes with information on how consumers may file complaints with the FTC.

Wake-up call

The FTC’s writings were further highlighted in a subsequent advisory issued by law firm Manatt, Phelps & Phillips, LLP to its clients that sought to highlight conclusions for firms operating in the digital currency industry.

Writing on behalf of the firm, Carol Van Cleef and Linda Goldstein suggest that the post could foreshadow more formal actions by the agency against industry participants.

“The blog post makes clear that the FTC believes it is very important consumers in these transactions be made fully aware of all of the material terms of the merchant’s return and refund policies since these payments do not enjoy the same legal protections as credit card payments,” the authors write.

Van Cleef and Goldstein sought to portray the advice to consumers as potentially significant for industry merchants and processors.

“Sellers and processors in consumer transactions involving virtual currency should expect the FTC to scrutinize their privacy policies and procedures like those of sellers and processors in other types of transactions,” the authors write.

The guidance goes on to conclude that the industry should treat the blog post as a “wake-up call” about the need for merchants and processors to address privacy concerns.

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