FOR YOUR INFORMATION..........................FEBRUARY 4, 1993
The Federal Trade Commission has given final approval to a
consent agreement with Citicorp Credit Services, Inc., a
subsidiary of Citicorp, settling charges that it aided and
abetted a deceptive national travel club. The FTC had charged
that Citicorp Credit Services continued to process the club's
credit-card sales even when it knew, or should have known, about
the club's deceptive sales practices.
The company, based in Long Island City, New York, processed
credit-card transactions for merchants through its Citicorp
Establishment Services division, which it sold in June 1992.
The final consent order imposes a duty on Citicorp Credit
Services to investigate merchants with high chargeback rates, and
to terminate them if they are found to be engaging in fraudulent,
deceptive or unfair practices. (A chargeback is the reversal of
the credit-card charge process, whereby the amount of the sale is
removed from the consumer's account and charged back to the mer-
chant. A high chargeback rate can be an indicator of fraud.)
Specifically, the order requires Citicorp Credit Services to:
-- stop processing credit-card sales for merchants with
chargeback rates exceeding 6 percent for two of the
preceding three months or, alternatively, investigate
whether the high rate is due to fraudulent, deceptive or
unfair activity and, if so, terminate them at that point;
-- stop processing credit-card sales for merchants with
"consumer-dispute chargebacks" exceeding 3 percent for two
of the preceding three months or, alternatively, require
them to follow a plan to reduce the chargeback rate to below
3 percent within four months and to maintain that rate for
three consecutive months. Citicorp Credit Services must
either terminate immediately merchants who fail to comply
with the plan, or investigate whether their high chargeback
rate is due to fraudulent, deceptive or unfair activity and,
if so, terminate them at that point.
- more -
Citicorp Credit Services--02/04/93)
In addition, under the order, Citicorp Credit Services is
prohibited from processing credit-card transactions for any
merchant it terminated in the previous year because of excessive
chargebacks, without first investigating and concluding that the
merchant is not engaged in fraudulent, deceptive or unfair
activities.
The consent agreement was placed on the public record on
Nov. 10, 1992, and issued in final form on Jan. 29. (Docket No.
C-3413)
NOTE: A consent agreement is for settlement purposes only and
does not constitute admission of a law violation. When the
Commission issues a consent order on a final basis, it carries
the force of law with respect to future actions. Each violation
of such an order may result in a civil penalty of up to $10,000.
A press release summarizing the complaint and consent agree-
ment was issued at the time the Commission accepted the consent
agreement for public comment. Copies of that release and of the
final order are available from the FTC's Public Reference Branch,
Room 130, 6th Street & Pennsylvania Avenue, N.W., Washington,
D.C. 20580; 202-326-2222; TTY 1-866-653-4261.
# # #
MEDIA CONTACT: Bonnie Jansen, Office of Public Affairs
202-326-2161
STAFF CONTACT: David Medine, Bureau of Consumer Protection
202-326-3224
(FTC File No. 892 3033)
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