The Federal Trade Commission recently charged a merchant account provider with violating federal law. The business sells credit card and debit card payment processing services to other small businesses in a business to business or B2B fashion. Allegedly the business made unsubstantiated and false claims to unwary businesses. They also failed to to disclose material facts to retail businesses and sole proprietorships before applying for equipment and card processing services including credit cards and debit card processing. Seeking to halt the illegal practices and return money to victims, the FTC is stepping in.
Defendants include Merchant Services Direct LLC or MSD which was also doing business as Sphyra Inc.; Boost Commerce Inc.; Generation Y Investments LLC; Along with Kyle Lawson Dove; and Shane Patrick Hurley individually. Washington States Attorney General has simultaneously filed actions in the Superior Court for Spokane County, Washington.
The businesses, called independent sales organizations or ISOs sold merchants services to process credit cards and debit card payments. These businesses pay fees as their customers pay with credit or debit cards. Allegedly, MSD and the others called small businesses and presented themselves as the businesses’ current credit card processor, Visa, or MasterCard or the merchants bank account provider. Agents would then promise substantially lower credit card processing rates and fees. In fact they informed merchants that there would only pay a single fee. When questioned by merchants about other rates or fees they were told the merchant account was a fixed per-transaction rate leaving out all other rates and fees associated with the merchant services.
If that weren’t bad enough, MSD merchant account agents also duped their customers into leasing new, often unneeded credit card swipe terminals, citing incompatiblility with the new merchant services. Sometimes even going so far as to claim the terminals were free. Merchants were often told they could cancel at any time. Those who did found they were on the hook for the remaining 2-3 year lease for the terminals.
Their website was also misleading touting ‘wholesale pricing’ and ‘guaranteed lowes rates’ though according to the FTC there are no wholesale rates because third parties process credit card transactions, not MSD. When customers complained to the company they were told of refunds on their credit card processing rates & fees but were never issued any. Generally, only complaints with state attorneys or the Better Business Bureau were ever issued refunds.
The Commission vote authorizing the staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the Eastern District of Washington. In addition to filing the lawsuit, the FTC has sought a court order immediately halting the unlawful practices along with an order freezing the defendants’ assets and appointing a receiver over the corporate defendants.
The FTC acknowledges the assistance of the Washington State Attorney General’s Office and the Better Business Bureau of Eastern Washington, North Idaho, and Montana.
We at National Transaction Corporation post all of Visa, MasterCard and American Express rates on our website and we never lease equipment. In fact we sell our open, universally compatible credit card processing equipment at our cost. We provide merchant rate reviews free of charge. If you would like a review of your current credit card processing statement we will show you our rates compared to what you are getting now, free of charge. Feel free to call us anytime. 888-996-2273
August 15th, 2013 by Admin
