On April 10, Priority Payout Corporation, a payment processing company and the successor of InterBill Ltd., agreed to settle charges with the Federal Trade Commission regarding violations of a 2009 Final Judgment and Order for Permanent Injunction and Other Equitable Relief (the “2009 Order”). The 2019 settlement with the FTC bans Priority from engaging in any activity as a payment processor (or assisting others in payment processing), and it requires Priority to pay more than $1.8 million. 

In the 2009 Order, the FTC alleged that InterBill debited consumer accounts for a merchant’s nonexistent discount pharmacy card, and processed unauthorized consumer payments, despite consumer complaints. Based on the allegations, InterBill was enjoined from processing a consumer payment without first engaging in a “reasonable investigation” to determine that the consumer authorized his or her payments. In addition, InterBill was enjoined from processing any payment while “knowing or consciously avoiding knowing” that its client’s business practices are likely to be deceptive or unfair. InterBill was ultimately ordered to pay more than $1.7 million in equitable monetary relief for its payment processing activity. 

To comply with the 2009 Order, InterBill agreed to ensure that any payments processed were authorized by the consumer, and to monitor its transactions to ensure that its clients are not engaged in deceptive, unfair, or abusive practices in violation of the FTC Act. InterBill also agreed to immediately review any complaint against its clients, and to conduct a “reasonable investigation” of the cause of any consumer chargeback or return rate in excess of 2.5%. While investigating chargebacks and returns, InterBill agreed to suspend processing payments unless it found that its client’s business practices were not unlawful.  

Fast forward to 2019. The FTC alleged that Priority violated the 2009 Order by processing payments for clients engaged in fraud, failing to conduct reasonable investigations of its prospective clients, and failing to monitor client transactions to ensure that clients have not engaged in unlawful business practices. There were other violations of the 2009 Order, including failure to submit written acknowledgment of the 2009 Order, failure to deliver a copy of the 2009 Order to its employees, and failure to submit a written compliance report to the FTC. As a result of its violation of the 2009 Order, the 2019 settlement with the FTC banned Priority from engaging in activity as a payment processor and assisting others in payment processing, and ordered Priority to pay more than $1.8 million as compensatory contempt relief. 

The 2009 Order and 2019 settlement serve as a reminder of the importance of payment processors having safeguards in place to monitor client activity. Payment processors must continue to perform due diligence regarding current and prospective clients to ensure that consumers authorize payments that are processed, and that clients are not engaging in any type of unlawful activity.