Capital Payments LLC, an Independent Sales Organization (ISO), has agreed to settle Federal Trade Commission charges that it enabled a telemarketing scheme called The Tax Club to use merchant accounts to process consumers’ credit card payments. The Tax Club allegedly bilked consumers who were trying to start a home-based business.
As alleged in the FTC’s complaint, Capital Payments, now known as Bluefin Payment Systems LLC, ignored red flags about The Tax Club, such as a high rate of chargebacks (reversals of credit card charges), chargeback requests from consumers stating that charges were fraudulent or unauthorized, and alerts from financial institutions. Capital Payments ended its relationship with The Tax Club only after the FTC, and the states of Florida and New York, sued The Tax Club in 2013. The complaint charges Capital Payments with assisting and facilitating deceptive telemarketing acts in violation of the Telemarketing Sales Rule (TSR).
Under the settlement order, the company is banned from payment processing or acting as an ISO for several categories of clients and prohibited from assisting or facilitating any merchant it knows, or should know, is violating the FTC Act or the TSR.
In addition, Bluefin must screen prospective clients that meet certain criteria, monitor their sales activity to detect indications of deceptive conduct, and terminate contracts with those engaged in deceptive conduct.
The order imposes a $2.6 million judgment that will be partially suspended based on the company’s current financial situation. In partial satisfaction of the judgment, Bluefin will pay $750,000. The full judgment will become due immediately if the company is found to have misrepresented its financial condition.
The Commission vote authorizing the staff to file the complaint and proposed stipulated final order was 4-0. The U.S. District Court for the Eastern District of New York entered the order on February 4, 2016.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.
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