The FTC and Seven States Sue Processor for Aiding Suspect Merchants

In its seventh action against a payment processor since 2004, the Federal Trade Commission along with seven state attorneys general announced this week they are suing a Lake Mary, Fla.-based check and automated clearing house processor that extracted millions of dollars from consumers by processing fraudulent payments for a suspect roster of telemarketers and Internet-based merchants selling credit cards, credit-repair services, and even access to government grants. The company, Your Money Access LLC, and its affiliates in Florida and Pennsylvania allegedly processed $200 million in debits or attempted debits to consumer bank accounts between June 2004 and March 2006, with consumers or their banks returning or rejecting more than $69 million of the attempted debits. In addition to Your Money Access, which did business as Netchex Corp., Universal Payment Solutions, Check Recovery Systems, NterGlobal Payment Solutions, Subscription Services Ltd., and YMA Company LLC, the complaint names the enterprise's two top officers, president Derrelle Janey and chief executive Tarzenea Dixon. Digital Transactions News' attempts to reach them today by phone were unsuccessful. YMA's Web site is “under construction,” and the Orlando-based Better Business Bureau of Central Florida's Web site says the company is out of business. The complaint alleges violations of the Federal Trade Commission Act, the FTC's telemarketing sales rule, and various state consumer-protection and fraud laws. Authorities filed the action in U.S. District Court for the Eastern District of Pennsylvania, the state where several YMA affiliates were located. It seeks injunctions, refunds, and civil penalties. While many of YMA's merchants failed to deliver promised goods, a common telemarketing-related scheme, what differentiates this case from many others is that YMA and its affiliates allegedly knew through merchant applications, false claims in sales scripts, and other documentation as well as their ongoing monitoring that their merchants would likely generate very high rates of returns on ACH and check transactions, but processed them anyway. In one example, the complaint says six merchants selling “government grant packages”?various schemes in which the consumer was led to believe he would easily get a government grant; sometimes the sellers would just ship information about grants?projected returns ranging from 35% to 60%. Their actual experience ranged from 41% to 82%. “Despite these alarmingly high projected and actual return rates, YMA accepted and processed for these clients during different periods between November 2005 and March 2006,” the complaint says. This cohort generated $2.48 million in remotely created checks, or RCCs, which are unsigned paper checks in which the account holder's signature line contains a phrase such as “Signature Not Required, “Authorized by Drawee,” “Authorized by Account Holder,” or similar wording. YMA allegedly used consumers' bank routing and account numbers to create RCCs. The high rate of returns indicates many transactions had no consumer authorization, the government says. In June 2004, YMA bought three Newtown, Pa.-based processors, Universal Payment Solutions, Netchex, and Check Recovery Systems, where were under common ownership and management. Even before YMA's acquisition, what the FTC calls the Newtown processors all had high return rates?often above 40% and sometimes up to 70%, the FTC claims. Their founder, Donald Hellinger, settled with the FTC in 1995 for deceptive sales of credit cards and other products through 900-toll numbers, the agency says. The FTC also sued several of the Newtown processors' merchants for fraud. In one case a judge ordered a fraudulent card marketer to set up a $36.7 million consumer-redress fund. The states joining the FTC in the YMA suit are Illinois, Iowa, North Carolina, North Dakota, Nevada, Ohio, and Vermont.