FTC Halts Alleged Illegal Consumer Account Billing Operation

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On February 20, the FTC announced that it obtained a preliminary injunction in the U.S. District Court for the District of Nevada against a firm and affiliated entities alleged to have debited consumers’ bank accounts and charged their credit cards small amounts, without authorization. Although the FTC does not yet know how the defendants obtained the consumers’ financial information, the FTC states that some consumers had recently applied for payday loans via the Internet. The FTC’s complaint alleges that the firms attempted to conceal the scheme by (i) creating dozens of shell companies to open merchant accounts with payment processors that enable merchants to get customers’ money via electronic banking, (ii) registering more than 230 Internet domain names, often using identity-hiding services and auto-forward features, and (iii) inflating their total number of deposits and lowering their return rates by taking multiple unauthorized debits of a few pennies each, and then immediately refunding them before making a larger debit of about $30. The FTC is seeking, among other things, restitution and a permanent injunction. The FTC was assisted in its investigation by the Utah Department of Commerce’s Division of Consumer Protection and the Arkansas Attorney General Office’s Consumer Protection Division.


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