http://www.ftc.gov/opa/2007/01/interbill.htm "For Release: January 8, 2007 FTC Sues Payment Processor That Took Millions From Consumersâ?? Bank Accounts Without Their Knowledge A payment processor violated federal law when it debited, or tried to debit, more than $9.9 million from consumersâ?? bank accounts â?? at $139 each â?? without their approval, according to the Federal Trade Commission. According to a complaint the FTC filed in federal court, Nevada-based InterBill Ltd. acted on behalf of a fraudulent enterprise known as â??Pharmacycards.com.â? In 2004 the FTC charged Pharmacycards with debiting millions of dollars from consumersâ?? checking accounts, without their consent, for nonexistent â??discount pharmacy cards.â? InterBillâ??s business is processing payments for merchants, including those its industry considers â??high risk,â? such as online gaming and mail and telephone marketing. Using consumersâ?? names and bank account information provided by Pharmacycards, InterBill debited thousands of consumersâ?? accounts despite indications that the operation was bogus. Consumers had no contact with InterBill or Pharmacycards before money was taken from their checking accounts, the FTC alleges. According to the complaint, InterBill did not follow its own guidelines for new merchants before doing work for Pharmacycards, including collecting information, checking references, and verifying a physical address. Pharmacycards provided a London, England, mail drop as a business address and conducted all of its business by pre-paid, virtually untraceable cellular phones and free, anonymous e-mail and facsimile accounts. The Pharmacycards Web site provided a toll- free customer service number that was answered at a call center in Montreal, Quebec, Canada and a fake address in British Columbia, Canada. Pharmacycards operators used the identity of a Cyprus corporation and directed that their funds be wired to a Cyprus bank account. The complaint alleges that InterBill anticipated high rates of returned or reversed transactions, a sign that unauthorized debits from consumersâ?? accounts were likely. InterBill did not request or obtain proof that consumers had authorized Pharmacycards to debit their accounts and, shortly after starting its work, InterBill received strong indications that the transactions wereunauthorized â?? rates of returned transactions skyrocketed, and InterBill received complaints from consumers and banks. InterBill ultimately asked Pharmacycards about the source of its consumer database and requested proof that consumers had received the material for which they were billed, but despite receiving insufficient answers, InterBill kept processing payments. According to the complaint, more than 70 percent of the attempted transactions were returned or refused by the consumersâ?? banks, and more than $2.38 million was debited from consumersâ?? accounts. The FTC charges InterBill and its principal officer, Thomas Wells, with violating Section 5 of the FTC Act by unfairly processing debt transactions to consumerâ??s bank accounts. The FTC seeks consumer redress and a permanent bar on further violations. The Commission vote to authorize staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Nevada on December 27. NOTE: The Commission authorizes the filing of a complaint when it has â??reason to believeâ? that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants actually have violated the law. The case will be decided by the court. Copies of the complaint are available from the FTCâ??s Web site at http://www.ftc.gov and also from the FTCâ??s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, asecure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad. ..." (underlining added)
This story has been simmering for a long time. Payment processors willing to cross the line are essential to pulling it off. http://www.washingtonpost.com/wp-dyn/articles/A60345-2004Jul18.html http://www.msnbc.msn.com/id/4534338/
