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FTC Charges Payment Processor in Fraud Scam

Third-party payment services aided Internet scammers in attempting $200M in online fraud, FTC says

The Federal Trade Commission (FTC) and seven state attorneys general have charged a payment processor with debiting consumers’ bank accounts on behalf of numerous fraudulent telemarketers and Internet-based merchants.

The FTC and the attorneys general of Illinois, Iowa, Nevada, North Carolina, North Dakota, Ohio, and Vermont have charged the defendants with offering payment processing services to a variety of merchants, many of which were engaged in deceptive telemarketing or Internet-based schemes.

These schemes were designed to extract money from consumer bank accounts by inducing consumers -- through misrepresentations and omissions in connection with the marketing of products or services -- to provide the merchant with the consumer’s personal bank account information, the FTC says. The merchants then transmitted the bank account information to the defendants, who processed debits to the consumers’ bank accounts.

Between June 23, 2004 and March 31, 2006, the defendants processed more than $200 million in debits and attempted debits to consumers’ bank accounts, the complaint alleges. 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. In many instances, after the defendants debited accounts, the merchants failed to deliver the promised products or services, or sent consumers relatively worthless items.

If a court finds the payment processor, known as YMA, guilty, then its members will be required to give up their ill-gotten gains and pay money back to the affected consumers.

— Tim Wilson, Site Editor, Dark Reading

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