A federal judge on Wednesday denied a Federal Trade Commission motion for a temporary restraining order that would have shut down Merchant Services Direct LLC, a Spokane Valley, Wash.-based ISO. The FTC still plans to bring the case to trial.

The agency has charged that the ISO misrepresented itself as the current merchant services provider, Visa, MasterCard or a bank when making sales calls to potential clients.

The ISO also allegedly misled merchants by falsely claiming that payments terminals were out of date, overstating the amount of money it could save merchants on transaction services and telling merchants that the contracts they signing were merely applications for services, the FTC charged.

But the agency failed to substantiate those allegations at the hearing before Judge Thomas O. Rice in U.S. District Court for the Eastern District of Washington, says Barrie VanBrackle, an attorney who follows the payments industry and is a partner in the Washington, D.C., office of Manatt, Phelps &Phillips, LLP.

“The judge ruled that the FTC didn’t do its homework, based their motion on stale information and didn't have enough consumer complaints about the business,” VanBrackle says.

The ruling supports VanBrackle’s contention that the FTC should contact ISOs and inform them of alleged wrongdoing and give them an opportunity to correct the situation before initiating court cases, she says.

Instead, the FTC plans to pursue the case, VanBrackle notes.

“They lost the battle and are going to proceed to the war,” she says.

Merchant Services Direct also does business as Sphyra Inc., Boost Commerce Inc., Generation Y Investments LLC, Kyle Lawson Dove and Shane Patrick Hurley, according to an FTC report.

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