Independent Resource Network Corp., a Westbury, N.Y.-based ISO, has agreed to pay $400,000 and waived its right to funds in a merchants reserve account to settle a civil suit brought by the Federal Trade Commission.
The FTC sued IRN for providing transaction services to Innovative Wealth Builders Inc., claiming in the suit that the ISO should have known that its client was violating the FTCs Telemarketing Sales Rule.
Anger over the suit rippled through a meeting held to discuss the matter last July at the Midwest Acquirers Association annual conference in Chicago. ISOs at the meeting claimed its impractical for them to become familiar with the business operations of all the merchants in their portfolios.
We cannot police the retailing industry, one meeting participant declared.
But an executive at the privately held IRN took a more conciliatory tone this week in a written statement on the settlement.
The lesson for us, and for all payment processors, is that there are unscrupulous merchants out there and we must be ever-vigilant to protect ourselves as well as the consuming public, James Marchese, IRN executive vice president, said in the statement.
IRN intends to watch out for wrong-doing among its clients and predicts the rest of the acquiring industry will do the same.
We are confident that the heightened due diligence practices we have implemented will set the standard for the industry and we expect other payment processors will follow suit, Marchese said in the statement.
Such practices might have detected problems with Innovative Wealth Builders. The FTC charged that IWB bilked tens of thousands of consumers out of nearly $10 billion in a credit card rate reduction scam.
In January 2013, the FTC filed a complaint to stop IWB and its principals from continuing their deceptive telemarketing practices, according to an FTC statement. The company falsely promised consumers that they could reduce the interest rates on their credit card debt and save them thousands of dollars. For most of the time that IWB operated its scam, IRN was its exclusive payment processor, the FTC said.
In June 2013, the FTC sued IRN in an amended complaint. The FTC alleged that IRN facilitated IWBs scheme when IRN knew, or consciously avoided knowing, key facts about the illegal conduct of IWBs telemarketing scam in violation of the Telemarketing Sales Rule. IRN chose to continue profiting from processing IWBs credit card transactions, the FTC said.
The FTCs stipulated order prohibits IRN from providing payment processing for clients that sell any debt relief product or service. IRN is also barred from offering processing for clients engaged in certain types of businesses, such as collection agencies, credit card protection services and lead source providers. It cannot provide services for money making systems, including get rich quick schemes, mortgage loan modification services or outbound telemarketing without conducting reasonable upfront screening and ongoing monitoring. The ISO cannot assist any client they know, or should know, is making misrepresentations to consumers or is engaged in unauthorized billing of consumer accounts.
The Commission voted 5-0 to approve the stipulated order. The order was approved by the U.S. District Court for the Middle District of Florida.