On May 19, the FTC announced that the U.S. District Court for the District of Nevada held a payment processor and two of its executives in civil contempt for allegedly violating a 2015 order governing the company’s payment processing activities. According to the FTC, the court found that the defendants failed to comply with requirements designed to prevent the processing of payments for merchants engaged in fraudulent or deceptive conduct and imposed $6.5 million in sanctions.
The underlying order arose from a 2015 settlement of an earlier FTC enforcement action involving allegations that the payment processor facilitated unauthorized payment transactions. Under the settlement, the firm committed to certain compliance measures and paid $3.3 million without admitting wrongdoing. In its recent ruling, the court concluded that the defendants violated multiple provisions of the 2015 order. Specifically, the court found that the defendants:
- Processed transactions for prohibited merchants. The court found that the defendants continued processing transactions for certain merchants on Mastercard’s Member Alert to Control High-Risk Merchants (“MATCH”) list.
- Helped merchants avoid fraud monitoring controls. The court found that the defendants assisted certain merchants in shifting transactions among accounts and avoiding fraud and risk-monitoring programs.
- Failed to conduct required underwriting. The court found that the defendants did not adequately collect, verify, or investigate merchant information required under the 2015 order.
- Failed to satisfy monitoring and reporting obligations. The court found that the defendants continued processing for merchants with elevated chargeback activity without completing required investigations and reports.
The court imposed $6.5 million in sanctions after concluding that the defendants violated the injunction’s requirements. The court declined the FTC’s requests to appoint a receiver and permanently prohibit the executives from participating in the payment processing industry.
Putting It Into Practice: The FTC continues to scrutinize entities that provide services to businesses engaged in consumer-facing activities, particularly where those entities allegedly facilitate conduct that harms consumers (previously discussed here). Although this case involved violations of a prior court order, the decision underscores the FTC’s continued focus on payment processors and other third-party service providers that play a role in the payments ecosystem. Payment processors should review merchant onboarding, underwriting, monitoring, and chargeback management practices to ensure they remain consistent with applicable legal requirements and any existing regulatory or court-imposed obligations.
*Chris Wong is a law clerk in the firm's Washington, D.C. office.