Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Payment processors settle FTC allegations over “trial” memberships, (Aug 4, 2014)
Organizations Mentioned:Blaze Processing, LLC | CardFlex, Inc. | Mach 1 Merchanting, LLC | Visa
By Greg Hammond, J.D.
Blaze Processing, LLC, Mach 1 Merchanting, LLC, and the manager of both companies, Shane Fisher, have settled FTC charges that they illegally processed over $26 million in illegal credit and debit card payments. The payments were allegedly connected with a scheme that allegedly swindled consumers out of over $275 million by repeatedly charging them for “trial” memberships they never ordered for fake government-grant and money-making programs (FTC v. CardFlex, Inc., File No. 122 3003, Case No. 3:14-cv-00397).
According to the FTC’s complaint, the deceptive operation—known as “I Works”—obtained and maintained merchant accounts that enabled it to process debit and credit card payments through the Visa and MasterCard payment networks. Blaze Processing, Mach 1, and Fisher were charged with providing access to those payment networks, which I Works used to carry out its deceptive scheme. Specifically, the Commission charged them with assisting I Works in evading credit card network fraud monitoring programs by preventing over 293 accounts from reaching certain monetary thresholds.
The stipulated final order will effectively ban Blaze Processing, Mach 1, and Fisher from engaging in payment processing, or acting as an Independent Sales Organization or sales agent for any client. In addition, Fisher has agreed to a monetary judgment of $328,467.23, and Blaze Processing and Mach 1 have agreed to partially suspended judgments of $386,131.62 and $328,467.23, respectively. The three defendants are also prohibited from using or disclosing any consumer account information acquired, and must dispose of it within 30 days.
The FTC filed suit against the I Works operation, including 27 companies and 10 individuals, in December 2010. The complaint alleged that the defendants violated the FTC Act by misrepresenting that government grants were available for paying personal expenses; that consumers were likely to get the grants through the I Works program; that users of their products will gain substantial income; and that their offers were free or risk-free (FTC v. Johnson, File No. 102 3015, Case No. 210-cv-02203).
Companies: CardFlex, Inc.; Blaze Processing, LLC; Mach 1 Merchanting, LLC
News: ConsumerProtection FederalTradeCommissionNews