FTC Enforcing the Law on Fraudulent Payment Processors


Friday, August 7th, 2020

Lately, there have been numerous complaints from merchants and other individuals concerning the safety of payment processing services.

There have been many incidents of “payment processing gone wrong,” where the service user loses thousands of dollars.

The Federal Trade Commission has chosen to take action and take the reins in tackling this issue. Andrew Smith, the boss of the FTC, said, “Payment processors that assist con-artists in stealing citizen’s money are a plague in the financial sector.”

The FTC director vowed to track down scammers and the payment processing firms working to rip off legitimate businesses.

FTC Using Consent Orders as Part of its Enforcement Process

Recently, FTC has used consent orders to initiate the consensual resolution of cases against three transaction processing firms. Different parties accused the firms of unjust and false practices against the Federal Trade Commission regulations that govern Telemarketing Sales.

One firm, First Data Merchant Services, signed a consent order that required the firm to pay 40 million USD in penalty fees. The firm was also asked to revise its transaction procedures and carry out annual third-party evaluations of their independent sales agents.

The other firm, Qualpay, was hit with a 47 million USD fine. They were unable to raise the money, leading to a consent order with the Federal Trade Commission that would see them make several changes in the organization. Qualpay was barred from handling money-making schemes as sales representatives and was required to conduct screening and analysis on merchant accounts that processed several transactions without using a card.

The final firm, Madera merchant services, was hit with an injunction and a 9 million USD fine. The firm was permanently barred from conducting any payment processing business for breaching the Telemarketing Sales Rule.

What’s the Takeaway?

Many merchant payment processors can learn from previous mistakes by other companies. For instance, Qualpay failed to maintain the set guidelines and standards when monitoring merchant accounts that lead to fraudulent and deceptive activities.

Ignoring high-risk business payments, high refund rates, and inconsistent application data can result in complications that will capture the FTC’s attention. Payment processors should follow the set merchant processing standards and monitor transactions for refunds and scam activity.