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Financial Services Law Insights and Observations

Credit card launderer settles FTC charges for $6.75 million

Federal Issues FTC Enforcement Credit Cards FTC Act Telemarketing Sales Rule UDAP Deceptive Unfair Payment Processors

Federal Issues

On April 22, the FTC filed a complaint against a Canadian company and its CEO (defendants) for allegedly participating in deceptive and unfair acts or practices in violation of the FTC Act and the Telemarketing Sales Rule (TSR) by, among other things, laundering credit card payments for two tech support scams that were sued by the FTC in 2014. The FTC alleges in its complaint that the defendants entered into contracts with payment processors to obtain merchant accounts to process credit card charges. While these contracts prohibited the defendants from submitting third-party sales through its merchant accounts, the FTC claims that the defendants used the accounts to process millions of dollars of consumer credit card charges on behalf of the two tech support operators and also processed charges for lead generators that directed consumers to the tech support scam. The FTC alleges that the defendants were aware of the unlawful conduct of at least one of the two operators and attempted to hide these charges from the payment processors.

Under the proposed settlement, the defendants neither admitted nor denied the allegations, except as specifically stated within the settlement, and (i) will pay $6.75 million in equitable monetary relief; (ii) are permanently enjoined from engaging in any further payment laundering or violations of the TSR; and (iii) will screen and monitor prospective high risk clients.