A federal court has temporarily halted an operation that allegedly used an intricate web of concealment to debit hundreds of thousands of consumers’ bank accounts and bill their credit cards more than $25 million without their consent.
The court also froze the defendants’ assets and appointed a receiver to control the business, pending trial.
The defendants named in the complaint are: Ideal Financial Solutions Inc., Ascot Crossing LLC, Bracknell Shore Ltd., Chandon Group LLC, Avanix LLC, Fiscal Fitness LLC, Steven Sunyich, Michael Sunyich, Christopher Sunyich, Shawn Sunyich, Melissa Sunyich Gardner and Kent Brown.
The defendants targeted financially vulnerable consumers who had never come in contact with them, and without authorization debited their bank accounts and charged their credit cards, usually for about $30, according to the FTC's complaint. Those who disputed the charges were told they had purchased something, such as financial counseling or loan matching services, or assistance in completing a payday loan application.
How the defendants got the consumers’ financial information is not known, but some consumers recently had applied for payday loans via the Internet, and entities that receive payday loan applications often sell the information to other parties.
The complaint alleged that, to avoid detection, the defendants created dozens of shell companies to open merchant accounts with payment processors that enable merchants to get customers’ money via electronic banking; the processors receive a fee for each transaction they handle. The defendants also allegedly registered more than 230 Internet domain names, often using identity-hiding services and auto-forward features.
As alleged in the complaint, debits and charges appeared on consumers’ bank and credit card statements with a telephone number and the name of one of more than 50 billing campaigns the defendants ran, each with multiple mail drops and addresses, including Debt2Wealth, Funding Assurance and Avanix.
Many consumers did not notice the debits and charges, which often caused them to incur bank penalty fees or overdraft charges due to insufficient funds. Others complained to their banks and often had the charges reversed, which was reflected in very high return rates – the rate of transactions rejected and returned by consumers or their banks.
Because of the high return rates, some payment processors terminated the defendants’ merchant accounts, and a Visa investigation led one payment processor to drop at least one merchant, according to the FTC.
To avoid losing merchant accounts due to high return rates, the defendants allegedly took multiple unauthorized debits of a few pennies each, and then immediately refunded them before making a larger debit of about $30. By doing so, they inflated their total number of debits and reduced their return rate.
To handle the tens of thousands of complaints they received from consumers, the defendants set up a call center in St. George, Utah, and hired a company with call centers in the U.S., the Philippines and El Salvador. When consumers asked how the defendants got their account numbers, call center agents were unable or unwilling to tell them.
In one case, an agent said, “l would like to make it clear that we do not have a copy of your application [for a payday loan or other services], but the IP (Internet Protocol) addresses and information that was submitted, in your name, as an application.”