"Liability? Shmiability. We're just processing payments."

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Short-sighted thinking like that has landed a lot of businesses in hot water with law enforcers.  They forget that the reach of federal and state consumer protection statutes can be expansive.  Under appropriate circumstances, payment processors – as well businesses handling ad copy, telemarketing, fulfillment, and a host of other functions – may be liable for the role they play in another company’s deceptive or unfair practices.

Illustrating that bedrock principle is a recent $3.6 judgment entered by a federal court in Pennsylvania against a payment processor and its subsidiary that allegedly debited consumers’ bank accounts illegally on behalf of deceptive telemarketers.  According to a complaint filed by the FTC – and state law enforcement partners in Illinois, Iowa, Nevada, North Carolina, North Dakota, Ohio, and Vermont –  Your Money Access and YMA Company, a subsidiary, processed unauthorized debits for companies running telemarketing and Internet schemes that violated the Telemarketing Sales Rule and state consumer protection laws.  The FTC and states alleged that Your Money Access and YMA played a critical role in the schemes by providing access to the banking system and the means to extract cash from customers’ accounts. 

In many instances, the marketers offering the underlying products and services either failed to deliver or sent substandard items.  But that shouldn’t have come as a big surprise, said the FTC and the states.  The stuff sold by YMA’s clients included bogus credit repair offers, purported government grant services, questionable credit card promotions, and other schemes on law enforcers’ “usual suspects” list.  In addition, the high rate of returned debits should have been a glaring indicator that something was amiss.

What messages should companies take from the $3.6 million judgment – and settlements with the corporate president and the CEO – entered in this case?

United front.  The close working relationship between state consumer protection agencies and the FTC was a critical factor in the investigation and prosecution of these cases.  That high level of cooperation is good news for consumers – and bad news for companies that flout the law.

Trust, but verify.  The defendants claimed to have screening procedures in place that required prospective clients to submit an application outlining who they were, where they were located, and the nature of their business – including a sample of the product and sales scripts.  But even when new clients left out basic information about their identity or business practices, submitted incomplete paperwork, or failed to provide any supporting documentation, the defendants nonetheless agreed to do business with them. The take-away tip?  No matter what a screening system may look like on paper, what matters is how it’s implemented.

Many (un)happy returns.  Payment processors need to keep an eye on returned debits.  A high level should set off alarm bells that the seller’s promises were hollow, their goods were shoddy, or the debits themselves weren’t approved by account holders.  In other words, a high return rate is a major warning sign of unauthorized debiting and should cause a legitimate payment processor to spring into action.


How does one report that a company is knowingly taking and profiting off of scam artists? I just reported the Green Dot Corporation to the BBB because it is obviously profiting off of scam victims. It actively deters fraud victims from submitting claims and also sells their contact information for marketing purchases (as it says on their fraud claim form). I'd like to see someone at the FTC just try to get through to Green Dot's customer support to receive help submitting a fraud claim.

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