Oh noes, more ugliness coming from the payment processing Industry. A payment processor and two of its principals are banned from processing electronic payments under a settlement with the Federal Trade Commission, which resolves charges that they debited, or tried to debit, millions of dollars from tens of thousands of consumers’ bank accounts without their consent. The FTC’s action against Automated Electronic Checking Inc. (AEC) and its principals, John P. Lawless, and Kenneth Mark Turville.
According to the FTC’s complaint, AEC knew, or should have known, that some of its client merchants got consumers’ financial account information through deceptive means and lacked consumers’ authorization to debit their accounts. As alleged in the complaint, the defendants processed payments by using remotely created payment orders (RCPOs), a payment method that allows a processor to reach into and debit a consumer’s bank account. Unlike some payment mechanisms, such as credit cards, RCPOs are not subject to significant oversight and monitoring, making them vulnerable to abuse.
The FTC charges that AEC turned a blind eye to excessively high return rates – the rate of transactions that were rejected and returned by consumers or their banks. AEC also instructed its clients on ways to avoid detection and ignored consumer complaints, the FTC alleged.
The settlement order requires that AEC pay $950,000 it earned from processing for EdebitPay and Platinum. The money will be returned to consumers harmed by AEC’s actions. The order also bans AEC, Lawless, and Turville from processing payments by any means in the future. Per the terms of the settlement, Lawless may work for a financial institution, but only if his job does not involve providing, selling, or arranging payment processing. In addition, the order:
- prohibits the defendants from billing consumers, or telling them they owe money, for telephone-billed transactions that have not been authorized by the consumers;
- bars the defendants from referring defendants’ payment-processing clients to other processors for money; and
- prohibits the defendants from selling or otherwise benefitting from customers’ personal information.
Today’s announcement is part of efforts by the Consumer Protection Working Group of President Obama’s Financial Fraud Enforcement Task Force (www.stopfraud.gov). Enormous crack-down is underway.