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FTC Bans Payment Processor for Fraudulent Debit Transactions

Priority Payout Corp. and the owner of the payment processing company are banned permanently from engaging in processing or assisting in it, and must pay a contempt judgment of $1.8 million, according to the Federal Trade Commission (FTC).

Priority Payout Corp. owner, Thomas Wells, has agreed to settle FTC charges that he and his company repeatedly violated a 2009 court order.

About the Court Order

Wells and his company, which in 2009 was called InterBill, Ltd., violated Section 5 of the FTC Act by processing fraudulent debit transactions to consumers’ bank accounts. The company did so on behalf of the fraudulent enterprise, Pharmacycards, according to the court order.

Wells and his company did this knowingly or consciously avoiding knowing that those debit transactions were not authorized by consumers, according to the order. The order further required Wells and the company to pay the FTC more than $1.7 million. The amount covers the money consumers lost through the debits Wells and InterBill processed.

Also, the order required that Wells and InterBill review and monitor their merchant-clients and prospective merchant-clients more carefully to ensure they were not engaged in any deceptive or fraudulent practices.

How InterBill and its Owner Violated the Court Order

Wells and InterBill’s successor, Priority Payout Corp., repeatedly violated the terms of the 2009 order by failing to properly review and monitor merchant and clients, according to the FTC. Therefore, Wells and Priority facilitated payment processing for a number of fraudsters, causing serious losses to consumers, according to the FTC.

Priority Payout’s Agreement with the FTC

In its settlement with the FTC, Wells and Priority Payout Corp. admit that the agency has enough evidence to prove that they violated the 2009 order, including that “they facilitated processing of consumer payments for merchants while knowing or consciously avoiding knowing that the merchants’ business practices were, or were likely to be, deceptive or unfair.”

Several of the merchants involved have been sued by the FTC, including Advertising Strategies and Stark Law.

Under the new settlement, Wells and his company must pay a contempt judgment of $1,812,204 plus the more than $1.7 million judgment from the 2009 order that remains outstanding.

Why this Judgment Should Matter to Payment Processors

As seen in this case, payment processors can pay stiff fines if they fail to look for red flags or closely monitor suspicious merchants and customers. Payment processors should look out for any misleading or false claims and for merchants that do not appear forthcoming with information about what they sell and their targeted customers. It is up to processors to be on the hunt for fraudulent debit transactions.

A Final Note on this Matter

Payment service providers and e-commerce platforms have a duty to protect their businesses and the public. If you think a merchant is selling an illegal product or service is in some way engaging in fraudulent activity, it is your duty to step in and stop it. Otherwise, like in this FTC case, you could face fines, punishment, or banishment.

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If you are a business that needs a high risk merchant account, then contact (EMB). It specializes in payment solutions for high risk businesses. Apply online today.