As part of the Federal Trade Commission’s ongoing crackdown on payment processors that turn a blind eye to fraud, the agency sued a payment processing business that allegedly assisted and facilitated a telemarketing credit card interest rate reduction scam.
In an amended complaint filed in federal court, the FTC alleged the payment processor, Independant Resources Network Corp. (IRN), knew, or consciously avoided knowing, key facts about the illegal conduct of a telemarketing scam operated by Innovative Wealth Builders, Inc. (IWB), and chose to continue profiting from processing IWB’s credit card transactions. Among the many indicators of illegal conduct that IRN allegedly ignored were IWB’s “alarmingly high chargebacks rates.”
A chargeback occurs when a consumer disputes a charge to a credit card and the charge is reversed. The average chargeback rate in the United States is well below one percent, meaning fewer than one out of every 100 credit card transactions is reversed as a result of a chargeback. According to the FTC’s amended complaint, IWB’s chargeback rate averaged above 20 percent for several years, and exceeded 40 percent in multiple months.
“Despite knowing, or consciously avoiding knowing, the illegal nature of the IWB Defendants’ business, IRN processed millions of dollars of credit card transactions for IWB, thereby earning considerable fees for itself while allowing the IWB Defendants to harm thousands of consumers who purchased the IWB Defendants’ bogus credit card interest rate reduction services,” the complaint states.
The amended complaint alleges that IRN is liable for assisting and facilitating deceptive and abusive telemarketing acts or practices in violation of the Telemarketing Sales Rule.
In January 2013, at the FTC’s request, a court in the U.S. District of Florida halted IWB’s business operations.
The Commission vote authorizing staff to file the amended complaint was 4-0.
