A ruling from the Eleventh Circuit Court of Appeals, upholding a verdict from the District Court for the Middle District of Florida, will likely embolden the Federal Trade Commission to go after more payment processing companies and other service providers who aid and abet companies committing fraud against individuals.
In this case, Federal Trade Commission v. HES Merchant Services Company Inc., the FTC also went after the payment processor, Universal Processing Services of Wisconsin, LLC, used by the defendant to process payments for fraudulent credit card interest rate reduction services.
The trial court entered a judgment in the amount of $1.7 million against the payment processing company, which matched the amount of fraudulent payments it processed on behalf of the defendants. The payment processing company argued that the judgment should be for $410,000, which was the amount of fees it received for processing the payments.
The payment processing company and its president overlooked several “red flags,” including the opening of a second account despite high chargeback rates on the initial account. As well, the individual who referred the account to the payment processing company has previously had a similar debt relief service shut down by the Florida Department of Agriculture.
Under the unfair, deceptive abusive acts or practices language in the Dodd-Frank Wall Street Reform & Consumer Protection Act, the CFPB, FTC, and other federal regulators have the authority to investigate these kinds of actions. At the state level, many state attorneys general have similar authority. As such, more payment processors are expected to be held liable in the event they help aid and abet illegal activities.
