Payment processor Humboldt Merchant Services has agreed to pay $12 million and accept permanent restrictions on its business to resolve Federal Trade Commission allegations that it processed card payments for shell companies used in unauthorized billing schemes.
The FTC filed its complaint and a stipulated order yesterday in the District Court for the Eastern District of Michigan against 5967 Ventures, LLC, which does business as Humboldt Merchant Services. The single count alleges unfair practices under Section 5 of the FTC Act.
According to the complaint, Humboldt, a registered independent sales organization, opened more than 1,000 merchant accounts from January 2021 through 2023 for shell entities set up by a straw-signer operation that served fraudulent online sellers. The FTC said at least $139 million flowed through those accounts between January 2021 and January 2024. Among the merchants using the accounts was Legion Media, which the FTC sued in June 2024 over business impersonation and recurring charge schemes.
The complaint alleges Humboldt opened the accounts despite red flags, including chargeback rates almost 10 times the levels that Visa and Mastercard treat as excessive. It also alleges that in late 2020 Humboldt moved its highest-risk accounts onto a lower-risk bank identification number licensed by an affiliated entity, NorthAB, LLC, to improve transaction approval rates. By 2021, according to the FTC, those accounts collectively posted chargeback rates above 7% of sales. The complaint further states that a senior Humboldt underwriter warned management in 2019 about shell accounts used in load balancing and card sharing schemes.
Under the stipulated order, Humboldt is barred from credit card laundering and from processing payments for straw companies, merchants on the Mastercard MATCH list for chargebacks, fraud or laundering, merchants previously named in consumer protection enforcement actions, and certain e-commerce merchants that use only a third-party mailbox or virtual office as their business address. The order requires written screening procedures, monthly chargeback calculations for covered clients, investigations when a client exceeds a 1% chargeback rate and 50 chargebacks in two of six months, and a sales agent oversight program.
Humboldt neither admits nor denies the allegations.
Read the complaint. Read the proposed order.
