With more than $26 million in unauthorized charges, several companies have been charged by the Federal Trade Commission for processing credit card payments illegally -- aiding a wide-scale internet scam that repeatedly charged customers for products they never ordered.
The FTC filed a complaint on July 30, listing defendants as CardFlex, Inc.; Blaze Processing, LLC; Mach 1 Merchanting, LLC; Andrew M. Phillips, CardFlex, Inc. director and president; John Blaugrund, CardFlex, Inc. director and officer; Shane Fisher, Blaze Processing, LLC and Mach 1 Merchanting, LLC principal and manager; and Jeremy Livingston, Blaze Processing, LLC and Mach 1 Merchanting, LLC principal and manager.
According to the complaint, the defendants had used a deceptive operation called iWorks to get and retain merchant accounts that allowed the unauthorized charges to be processed through MasterCard and Visa payment networks. Several tactics were used to carry out the deception, including opening at least 293 merchant accounts with 30 separate corporate names to process transactions for iWorks and employing load balancing to prevent MasterCard and Visa from detecting the fraudulent charges.
"Defendants knew or should have known that the merchants were deceptively
offering consumers free or risk-free information about products or services such as
government grants in order to deceptively enroll consumers in costly membership programs and repeatedly charge consumers' credit cards without their authorization," states the FTC complaint.
Evidence of the scam included numerous disputes about unauthorized charges, excessive chargebacks, deceptive statements on public merchant sites and merchant accounts getting flagged for inclusion in MasterCard and Visa reduction and chargeback monitoring programs.
Shane Fisher, Mach 1 Merchanting, LLC and Blaze Processing, LLC have agreed to settling the charges set by the FTC, meaning the suit is ongoing for Jeremy Livingston, John Blaugrund, Andrew Phillips, and CardFlex, Inc. However, the settlement states that Shane Fisher, Mach 1 Merchanting, LLC and Blaze Processing, LLC are prohibited from acting as ISO, sales agents or payment processor for third parties.
Close to a million in fines was imposed for the settlement but only $328,607.78 will be collected. The rest have been suspended due to inability to pay. Those who haven't settled with the FTC will face stiffer penalties should they lose the case, what with the FTC aiming to get back all of the $26 million that were charged without authorization plus legal fees.
The FTC warns consumers to be more careful with their purchases and provides information on spotting, stopping and avoiding fraudulent companies to prevent cases like this from happening again.
