The Federal Trade Commission has permanently banned a payment processor from processing debt relief payments after it was accused of facilitating a student loan debt relief scheme while also requiring the company and its owner pay $500,000 that will be used to refund individuals who were duped by the scam.
Automatic Funds Transfer Services and its owner, Eric Johnson, were accused of processing at least $31 million in consumer payments as part of a scheme that was uncovered by the FTC back in 2019. The perpetrators in that scheme were accused of demanding illegal upfront payments and not remitting all of the funds consumers gave to the company to be paid toward their outstanding balances.
The payment processor continued to work with the debt relief provider even after receiving complaints from consumers and banks, and were aware of high chargeback rates and that the company was charging illegal upfront fees. It was also aware that the debt relief company changed its name multiple times to mitigate negative publicity, according to the FTC.
Along with being banned from processing debt relief payments, AFTS must also obtain a signed contract with any merchant prior to processing payments on its behalf and keep a close eye on high-risk clients to ensure they are not operating illegally.
The settlement includes a judgment of more than $27 million, but the majority of that has been suspended because the company and its owner are unable to repay it.
“Firms that facilitate fraud — especially against struggling student borrowers — need to pay a price,” said Samuel Levine, Director of the FTC’s Consumer Protection Bureau, in a statement
