A Latvia-based Payment Processor Assents to FTC’s Claims of Taking Part in a Fraudulent Free-Trial Scheme

Feb 13, 2020

Transact Pro, a Latvia-based payment processing firm and its ex-chief executive have finally assented to FTC’s allegations of a phony “free-trial” offer scheme.

According to the Federal Trade Commission, the accused took part in misconduct that paved the way for a fraudulent free trial offer—ripping off US customers.

Andrew Smith, head of FTC’s Bureau of Consumer Protection —the section that protects customers—said the accused Payment Processor, “helped scammers drain customer accounts without their consent.” He also issued a stern warning that the Commission will crack down on payment processing companies that take part in illegal activity — whether located in or outside the US.

The charges, filed in 2018, claim that Apex Capital Group LLC, and its associates, advertised fraudulent free-trial offers for online beauty effects and diet supplements. The retailer went on to deduct the full cost of the items— and further subjected customers to a recurring negative billing option without seeking their say-so.

As an extension of what seemed like a well-planned rip-off, the perpetrators (Apex Capital and its associates) used several startups in the US and UK to run merchant accounts that collected customer card payments— an illicit act referred to as Credit-card laundering.

Late last year, in Sept, Apex LLC defendants assented to the claim, vowed to stop the unlawful act, and willingly agreed to give up assets estimated at around $3 million to $6 million.

But this was long after the Federal Trade Commission had amended the claim —back in May— this time targeting Transact Pro and its ex-chief executive, Mark Moskvins.

The updated FTC complaint blamed Transact Pro for illicitly keeping merchant accounts linked to the APEX LLC fraud and helping the perpetrators dodge chargeback review programs.

The latest ruling — read on Jan 17, 2020— brought an end to all the qualms the FTC had against the payment processing firm.

It also meant that Transact Pro is:

  1. Prohibited from engaging in the purported misconducts
  2. Banned from processing transactions for specific merchant categories.
  3. Entitled to scrutiny. In particular, the high-risk entities it onboard.
  4. To pay $3.5 million in fine, which the Commission will use to compensate ripped-off shoppers.

The FTC is the US government body that supervises markets to protect customers from unfair practices.

Final words

Payment service providers must now scrutinize the merchants they work with to ensure compliance and avoid illegal conduct that could lead to trouble—like it did to Transact Pro.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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