FTC Urges Court to Sanction Payment Processors for 2015 Order Violations

The Federal Trade Commission (FTC) has filed a motion in federal court requesting sanctions against Cliq, Inc. This company, previously known as Cardflex, Inc., and its executives, are accused of violating a 2015 order related to fraudulent credit card processing.

Details of the Allegations

The FTC’s motion, submitted to the U.S. District Court for Nevada, asserts that Cliq and its leaders, CEO Andrew Phillips and Chief Technology and Security Officer John Blaugrund, have willfully neglected their obligations outlined in the 2015 order. The agency has proposed several course of action, including:

• Imposing $52.9 million in compensation for affected consumers.
• Permanently banning Phillips and Blaugrund from any involvement in the payment processing industry.
• Appointing a receiver to ensure compliance with the order’s stipulations.

Impact on Consumers

According to Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, these actions aim to hold companies accountable for neglecting warning signs that compromise the integrity of the U.S. payment system. He stressed that the FTC would actively pursue accountability for entities that disregard consumer protection guidelines.

Specific Violations Reported

The FTC identified several serious violations committed by Cliq, including:

• Processing payments for firms listed on Mastercard’s Member Alert To Control High (MATCH) list, which consists of merchants banned for high chargeback rates.
• Facilitating clients’ attempts to circumvent fraud detection mechanisms set by banks and credit card networks.
• Handling transactions for clients deemed high-risk without adequate screening measures to assess their business practices.
• Neglecting to monitor sales and transactional activities of certain clients, which could indicate deceptive practices.

Given these infractions, the FTC insists that Cliq, along with Phillips and Blaugrund, should face contempt charges. The agency advocates that the court should ensure restitution for injured consumers while mandating compliance efforts from Cliq.

Next Steps in Legal Proceedings

The ongoing legal proceedings in Nevada highlight the FTC’s commitment to enforcing consumer protection laws. With this case, the agency aims to reinforce the importance of adherence to established orders within the payment processing sector.