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Financial Services Law Insights and Observations

FTC, Ohio AG halt payment processor and credit card interest-reduction telemarketing operations

Federal Issues FTC State Attorney General Enforcement Payment Processors Credit Cards Telemarketing Sales Rule FTC Act

Federal Issues

On July 29, the FTC and the Ohio attorney general announced temporary restraining orders and asset freezes issued by the U.S. District Court for the Western District of Texas against a payment processor and a credit card interest-reduction telemarketing operation (see here and here). According to the FTC, the payment processor defendants allegedly violated the FTC Act, the Telemarketing Sales Rule (TSR), and various Ohio laws by, among other things, generating and processing remotely created payment orders or checks that allowed merchants—including deceptive telemarketing schemes—the ability to withdraw money from consumers’ bank accounts. The FTC asserted that the credit card interest-reduction defendants deceptively promised consumers significant credit card interest rate reductions, along with “a 100 percent money back guarantee if the promised rate reduction failed to materialize or the consumers were otherwise dissatisfied with the service.” However, the FTC claimed that most customers never received the promised rate reduction, were refused refund requests, and often received collection or lawsuit threats. Additionally, the credit card interest-reduction defendants allegedly violated the TSR by charging advance fees, failing to properly identify the service in telemarketing calls, and failing to pay to access the FTC’s National Do Not Call Registry.

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