FTC Actions against Payment Processors

When customers swipe their credit cards at stores or submit their card information online to make purchases, payment processors help merchants get their money in a number of ways. It is the job of the payment processor to manage credit and debit card processing, communicate with banks and credit card companies, establish merchant accounts, distribute proceeds from sales to merchants and implement anti-fraud measures, among other things. However, the payment processor industry is not immune to fraud.

Since 2001, the FTC has brought 34 federal lawsuits against companies and individuals that process credit and debit card transactions. According to the lawsuits, the payment processors named in these cases have assisted fraudulent merchants take millions of dollars from consumers by helping merchants hide fraudulent conduct, ignoring signs of fraud and processing unauthorized payments. Some of the cases go after payment processors along with other companies and individuals as part of a larger scheme while other cases name only payment processors as defendants. Laws alleged to have been violated in these lawsuits include the FTC Act, the Telemarketing Sales Rule, the Restore Online Shoppers’ Confidence Act (ROSCA), the Electronic Transfer Fund Act and the Fair Debt Collections Practices Act, in addition to several state laws.

The FTC has described taking actions against payment processors as a “critical component of the FTC’s effort to fight fraud … while halting hundreds of millions of dollars of consumer injury.” According to the lawsuits, defendants in these cases have processed payments for pyramid schemes, deceptive negative option offers, fake free trials and other alleged scams. The payment processor defendants have also allegedly assisted fraudulent merchants, telemarketers, debt collectors and companies that have been the subject of previous FTC actions.

Payment processors have paid millions of dollars to resolve claims filed against them with all but one of the cases resulting in some sort of monetary relief. Courts have also placed restrictions on payment processing in at least 29 cases, with some of the payment processors being banned from processing any and all payments, and others being banned from processing payments for certain types of businesses or transactions. And in at least 14 cases, courts have ordered payment processors to monitor and investigate their clients for fraudulent activity.

More information about the FTC actions against payment processors is below.

Case Name

(Year)

Payment Processor Defendant(s)[*] Allegation(s) Relating to Payment Processing Outcomes for Payment Processors
FTC v. Cordeiro d/b/a Quick-Checks

(2001)

Quick-Checks Processed payments for a telemarketer illegally selling foreign lottery tickets to U.S. residents. Settled without monetary relief
FTC v. Electronic Financial Group

(2003)

Electronic Financial Group, EFG Card Services and 3 officers Processed payments for numerous deceptive telemarketing schemes, including at least 4 that were the subject of FTC actions. Defendants also promoted/processed payments for 2 fraudulent advance-fee debit card marketing scams. Settled with monetary relief
FTC v. First American Payment Processing, et al.

(2003)

First American Payment Processing, Check Processing Center, CET Corp. and several officers Assisted fraudulent telemarketers by processing payments for advance-fee credit cards. (4 telemarketers were sued by the FTC and 2 were sued by New York.) Settled with monetary relief
FTC v. Universal Processing, et al.

(2005)

Universal Processing and 1 officer Processed unauthorized debits from consumers’ checking accounts for Pharmacycards, a fraudulent discount prescription benefits program that made false representations. Settled with monetary relief
FTC v. Global Marketing Group, et al.

(2006)

More than two dozen companies and individuals Provided payment processing services to at least 9 telemarketers that deceptively induced consumers with poor credit to pay an advance fee for a credit card they never received. Summary judgment with monetary relief against 1 individual; 2 individuals settled with monetary relief; default judgments against 24 companies [√√]
FTC v. InterBill, et al.

(2006)

InterBill and 1 officer Processed payments for Pharmacycards, a telemarketer that sold fake prescription discount cards, and continued to process transactions after receiving complaints that consumers had not authorized payments. Summary judgment with monetary relief against defendants [√]
FTC, et al. v. Your Money Access, et al.

(2007)

Your Money Access, its subsidiary and 2 executives Acted as a payment processor for hundreds of merchants marketing deceptive schemes — including credit repair, discount prescription benefits cards, and identity theft prevention services — and continued to debit consumers’ accounts despite signs payments had not been authorized. Settled with monetary relief
FTC v. Willms, et al.

(2011)

More than a dozen companies and individuals Deceptively marketed products and services, including teeth whiteners, weight-loss products and work-at-home schemes. Also falsely represented costs and failed to adequately disclose recurring fees. Settled with monetary relief [√√]
FTC v. Landmark Clearing

(2011)

Landmark Clearing and 2 executives Processed unauthorized debits from consumer bank accounts. Settled with monetary relief
FTC v. Loewen, et al.

(2012)

ReadyPay Services and Xavier Processing Services Processed card payments for fraudulent telemarketers engaged in a car marketing scheme in which they falsely represented that for a fee they would put consumers who listed a vehicle for sale online in contact with potential buyers. Summary judgment with monetary relief
FTC v. PCCare247 Inc., et al.

(2012)

5 individuals Processed transactions for computer repair products and services that were falsely marketed, including false claims that the operators were affiliated with well-known computer companies and that computers were infected with viruses and malware. 2 defendants settled with monetary relief; default judgment with monetary and injunctive relief against 3 defendants
FTC v. Ambrosia Web Design d/b/a AWD, et al.

(2012)

Several companies and individuals [**] Engaged in a telemarketing scheme selling credit card interest rate reduction services, processed unauthorized credit card transactions, and failed to adequately disclose fees for services. Settled with monetary relief [√√]
FTC v. WV Universal Management, et al.

(2012)

Newtek Merchant Services and its president [†] Provided payment processing services to TYS (a company offering credit card interest rate reduction services) even though there were indications that the company was engaged in fraud. Summary judgment with monetary relief against 1 defendant; 1 defendant settled with monetary relief
FTC v. Innovative Wealth Builders, et al.

(2013)

IRN Payment Systems [†] Processed credit card charges for IWB while it was the subject of an investigation by the Florida attorney general and the FTC, and had received fraud alerts from credit card companies and consumer complaints that charges were unauthorized. Settled with monetary relief
FTC v. The Tax Club, et al.

(2013)

More than a dozen companies and individuals Processed credit and debit card payments for The Tax Club Enterprise, a telemarketing scheme that used deceptive tactics to sell tax preparation and advice, business planning and counseling, and business credit development services. 15 defendants settled (all but 1 with monetary relief); claims against 2 defendants were voluntarily dismissed [√√]
FTC v. Automated Electronic Checking, et al.

(2013)

Automated Electronic Checking (AEC) and 2 executives Played a critical role in the unlawful business practices of its clients by obtaining consumers’ financial account information and debiting unauthorized transactions from their accounts. Settled with monetary relief
FTC v. Merchant Services Direct d/b/a Sphyra, et al.

(2013)

Merchant Services Direct (MSD) d/b/a Sphyra and 1 officer Deceptively marketed credit card payment processing services and equipment to small businesses by misleadingly offering them the “Guaranteed Lowest Rates” and wholesale rates when their rates were not the lowest or wholesale, and failed to properly disclose material information about the terms of the lease. Settled with monetary relief
FTC v. Pinnacle Payment Services, et al.

(2013)

More than two dozen companies and individuals Defrauded consumers by processing payments for debts that consumers did not actually owe or that defendants did not have authority to collect. 26 defendants settled with monetary relief; default judgment with permanent injunction and monetary judgment against 1 defendant [√√]
FTC v. Process America, et al.

(2014)

Process America and 3 officers Marketed fraudulent money-making opportunities resulting in more than $15 million in unauthorized charges to consumers’ credit and debit cards, and assisted merchants evade fraud-monitoring programs by opening multiple merchant accounts  and submitting merchant applications containing false information, among other things. 3 defendants settled without monetary relief; 1 defendant settled with monetary relief
FTC v. CardFlex, et al.

(2014)

CardFlex and 2 high-level employees Caused more than $26 million in unauthorized charges to consumers’ credit and debit cards by helping merchants maintain accounts that processed unlawful payments and evaded fraud-monitoring programs. 2 defendants settled with monetary relief; 1 defendant settled without monetary relief
FTC v. PayBasics a/d/b/a Livewire Commerce, et al.

(2015)

PayBasics and its co-founders Among other things, assisted merchants – including the Tax Club, which was the subject of a legal action filed by the FTC, New York, and Florida – complete applications for accounts that would be used to process credit and debit card payments. Settled with monetary relief
FTC, et al. v. E.M. Systems & Services

(2015)

CardReady and several executives Laundered consumer credit card payments for a debt relief scam that falsely promised a reduction in consumer credit card interest rates and charged consumers for debt relief never received. Settled with monetary relief
FTC v. Capital Payments, LLC

(2016)

Capital Payments, LLC [††] Opened and maintained merchant accounts to process unlawful credit card payments for the Tax Club (a telemarketer that sold purported small business development services) despite warning signs that it was a deceptive telemarketing scheme. Settled with monetary relief
FTC v. Electronic Payment Solutions of America, et al.

(2017)

Electronic Payment Systems, Electronic Payment Transfer, its CEO, and 2 managers Laundered credit card transactions for Money Now Funding, a business opportunity telemarketer sued by the FTC in 2013. 1 defendant settled with monetary relief; claims against 4 defendants pending
FTC v. G2 Consulting, et al.

(2017)

G2 Consulting and its owner Opened fraudulent merchant accounts that enabled telemarketing operations engaged in deceptive practices to process consumer credit card payments. Settled with monetary relief
FTC v. White

(2017)

Jamie White Fulfilled orders and processed payments for telemarketing schemes engaged in deceptive practices, including ones that solicited opportunities involving Amazon-linked websites. Settled with monetary relief
FTC v. MOBE

(2018)

Several MOBE companies, Transaction Management USA, and 1 individual Processed consumers’ payments for a fraudulent business education program, “My Online Business Education,” that used false and unsubstantiated income claims and false and misleading refund and money-back guarantees in marketing materials. 1 defendant settled with monetary relief; default judgments against 7 defendants
FTC v. Triangle Media Corp., et al.

(2018)

An owner and officer of Triangle Media, Jasper Rain, Hardwire Interactive and Global Northern Among other things, Defendants processed payments for skincare products, electronic cigarettes and dietary supplements marketed online using deceptive trial offers, inadequate disclosures and restrictive cancellation and refund policies. Settled with monetary relief
FTC v. Apex Capital Group, et al.

(2018)

SIA Transact Pro and its CEO [†] Between 2015 and 2018, Latvian payment processing company helped process payments for Apex Capital Group, a dietary supplements and personal care products company that deceptively marketed “free” trial offers and enrolled consumers in continuity programs without consent. Settled with monetary relief
FTC v. Allied Wallet, et al.

(2019)

AlliedWallet, GTBill, and 3 executives Assisted perpetrators of scams — including business opportunity scams, pyramid schemes and unlawful debt collection operations — charge consumers more than $110 million by submitting merchant applications with false information and working to evade monitoring measures designed to prevent fraud. Settled with monetary relief
FTC, et al. v. Madera Merchant Services, et al.

(2019)

Madera Merchant Services, B&P Enterprises, its owners and 1 officer Routinely processed payments for perpetrators of fraud and deceptive schemes. At least 3 of the defendants’ clients were sued by the FTC and state attorneys general for consumer fraud and deception, including the credit card interest rate reduction telemarketing scheme Educare Center Services. Settled with monetary relief
FTC v. RevenueWire d/b/a SafeCart, et al.

(2020)

SafeCart and its CEO Provided a variety of services — including payment processing services — to tech support scams, which advertised free computer diagnostic scans used to falsely identified performance and security problems to persuade consumers to purchase their software. Settled with monetary relief
FTC v. First Data Merchant Services, et al.

(2020)

First Data Merchant Services and its CEO Opened merchant accounts and processed payments for at least 4 deceptive schemes that were the subject of FTC and DOJ enforcement actions, including 2 business opportunity scams, a debt relief telemarketing scam and a criminal enterprise that used stolen credit cards to bill customers. Settled with monetary relief
FTC v. Qualpay

(2020)

Qualpay Processed payments for several companies that were sued by the FTC for defrauding consumers, including the business coaching and investment opportunity scheme “My Online Business Education” (MOBE) for which it processed nearly $80 million in payments despite warning signs the company was a scam. Settled with monetary relief

 

[*] There may be payment processor defendants not listed in this chart. Some of the complaints say that “defendants” engaged in payment processing without specifying which defendants.

[**] The payment processing allegations were added in an amended complaint.

[†] Payment processors were added as defendants in an amended complaint.

[††] The activities at issue in the complaint occurred between 2010 and 2013 when the defendant was Capital Payments, LLC. The defendant changed its name to Bluefin Payment Systems LLC in December 2014.

[√] Ten years later, the payment processor defendants settled charges that they violated the 2009 court order in this case. The agreement includes both monetary and injunctive relief.

[√√] There may be some defendants in this summary that are not payment processors. It includes all of the defendants because the complaint does not specify which ones are payment processors.

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