FTC Says Payment Processor Took Millions

coondoggie writes "The Federal Trade Commission and seven states have charged a payment processor with violating federal and state laws by debiting, or attempting to debit, from consumers' bank accounts on behalf of numerous fraudulent telemarketers and Internet-based merchants. Between June 2004 and March 2006, the payment processing company, Your Money Access, processed more than $200 million in debits and attempted debits to consumers' bank accounts. More than $69 million of the attempted debits were returned or rejected by consumers or their banks for various reasons, indicating the lack of consumer authorization, the FTC complaint alleges."

This went on for nearly 2 years?

[RattFink]

It shouldn't take that long to find out fraud is going on with a company with a charge-back rate higher then 25%. Why the heck wouldn't the credit cards cut off the tap and mitigate their damages? It seems sort of foolish to me.

Re:This place is bad news.

[GwaihirBW]

In general, I think the answer is that you don't . . . but the banks and the Feds do, and you can bet they keep records and track trends. Nearly 35% unauthorized charges implies that perhaps this processor is specifically courting fraudulent businesses, and is at the least not doing whatever vetting and verifying it's supposed to be.

Re:This went on for nearly 2 years?

[deniable]

Well, the summary seems to say that the merchants in this case were scammers. The feds may have wanted to back-trace / follow the money. It probably also took time to collect enough evidence for the case to proceed while not tipping off the accused.

Re:This went on for nearly 2 years?

[profplump]

Because the credit card company doesn't actually have damages. They don't even get bad PR. Here's what happens:

1. Bad Man, Inc. charges you through his CC processor, Bad CC Processor, LLC
2. Bad CC Processor, LLC forwards the charge to your CC company.
3. You notice and dispute the charge with your CC company.
4. Your CC company gladly removes the charge from your account.
5. Your CC company refuses to pay Bad CC Processor, LLC.
6. Bad CC Processor, LLC refuses to pay Bad Man, Inc.

Now, if the CC processor wasn't dirty, they'd eventually refuse to process charges from Bad Man, Inc., because he's obviously a fraud. But they are dirty, so they don't do anything. And if Bad Man, Inc. wasn't dirty he'd probably provide evidence to support his charges and try to get payment. But is his dirty, so he doesn't do anything.

At no point in that process does the CC company lose any money, other than a few minutes of telephone support time. They probably know that Bad CC Processor, LLC is dirty too, they just don't care. Obviously it would be good for their customers if they refused to accept charges from Bad CC Processor, LLC, but they aren't very motivated because, while they have to deal with some fraud reporting, they don't lose any money, don't really risk their reputation, and still get to process the successful 65% of charges that come in. If you've ever worked in a sales-oriented company, you'll know that it's essentially impossible to get sales to walk away from existing revenue streams, even if you could sustain a better profit margin on other types of business.

Re:This went on for nearly 2 years?

[Anonymous Coward]

Except that in your example above, you orignal vendor has the cash already, before the dispute gets returned. THEN the processor can try to take it back, but if it's not in the account or get's rejected (think stop payment) then the processor is out the cash. If this happens too much the processor drops the merchant. But then again, they're both shady, and therefore probably just splitting the fees they do collect and the costs incurred.