A payment processor that took millions of dollars – without authorization – from consumers’ bank accounts has been ordered by a federal court to pay nearly $1.8 million in consumer redress and to end the illegal practice, according to a statement released today by the Federal Trade Commission.
The FTC filed a complaint on Nevada-based InterBill LTD. and its owner Thomas Wells in 2006 for acting on behalf of a fake company known as “Pharmacycards.com”. In 2004 the FTC charged Pharmacycards with debiting millions of dollars from consumers’ checking accounts, without their consent, for nonexistent “discount pharmacy cards.”
InterBill’s business is processing payments for merchants, including those its industry considers “high risk,” such as online gaming and mail and telephone marketing. Using consumers’ names and bank account information provided by Pharmacycards, InterBill debited thousands of consumers’ accounts even though there were numerous indications that the pharmacy card operation was bogus. Consumers had no contact with InterBill or Pharmacycards before money was taken from their checking accounts, the FTC alleged.
Pharmacycards provided InterBill with 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.
According to the FTC’s complaint, InterBill didn’t follow its own guidelines for new merchants – and didn’t verify the addresses, phone numbers, or references the bogus merchant provided. The defendants anticipated that the scam would generate high return rates, they didn’t request or obtain proof that consumers had even authorized debits to their accounts, and they continued to process charges even after receiving complaints from consumers and banks and unacceptable explanations about unauthorized debits from the merchant.
The FTC complaint alleged that InterBill anticipated high rates of returned or reversed transactions, a sign that unauthorized debits from consumers’ 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 were unauthorized – rates of returned transactions skyrocketed, and InterBill received complaints from consumers and banks.
InterBill eventually asked Pharmacycards about the source of its consumer database. They also requested proof that consumers had received the material for which they were billed. But InterBill continued to process payments even though Pharmacycards failed to provide them with sufficient answers about their accounts. The FTC said that more than 70% of the attempted transactions were returned or refused by the consumers’ banks, and more than $2.38 million was debited from consumers’ accounts – some of which were later reversed.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).
Source:
Federal Trade Commission
