FTC ALLEGES DATA BROKER SOLD PERSONAL FINANCIAL INFORMATION TO SCAM CRIMINALS

FROM:  U.S. FEDERAL TRADE COMMISSION 
FTC Charges Data Broker with Facilitating the Theft of Millions of Dollars from Consumers' Accounts
Company Sold Personal Financial Information to Scammers

A data broker operation sold the sensitive personal information of hundreds of thousands of consumers – including Social Security and bank account numbers – to scammers who allegedly debited millions from their accounts, the Federal Trade Commission charged in a complaint filed today.

According to the FTC’s complaint, data broker LeapLab bought payday loan applications of financially strapped consumers, and then sold that information to marketers whom it knew had no legitimate need for it. At least one of those marketers, Ideal Financial Solutions – a defendant in another FTC case – allegedly used the information to withdraw millions of dollars from consumers’ accounts without their authorization.

“This case shows that the illegitimate use of sensitive financial information causes real harm to consumers,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “Defendants like those in this case harm consumers twice: first by facilitating the theft of their money and second by undermining consumers’ confidence about providing their personal information to legitimate lenders.”

The defendants collected hundreds of thousands of payday loan applications from payday loan websites known as publishers. Publishers typically offer to help consumers obtain payday loans. To do so, they ask for consumers’ sensitive financial information to evaluate their loan applications and transfer funds to their bank accounts if the loan is approved. These applications, including those bought and sold by LeapLab, contained the consumer’s name, address, phone number, employer, Social Security number, and bank account number, including the bank routing number.

The defendants sold approximately five percent of these loan applications to online lenders, who paid them between $10 and $150 per lead. According to the FTC’s complaint, however, the defendants sold the remaining 95 percent for approximately $0.50 each to third parties who were not online lenders and had no legitimate need for this financial information.

The Commission’s complaint alleges that these non-lender third parties included: marketers that made unsolicited sales offers to consumers via email, text message, or telephone call; data brokers that aggregated and then resold consumer information; and phony internet merchants like Ideal Financial Solutions. According to the FTC’s complaint, the defendants had reason to believe these marketers had no legitimate need for the sensitive information they were selling.

In the FTC’s case against Ideal Financial Solutions, between 2009 and 2013, Ideal Financial allegedly purchased information on at least 2.2 million consumers from data brokers and used it to make millions of dollars in unauthorized debits and charges for purported financial products that the consumers never purchased. LeapLab provided account information for at least 16 percent these victims.

The complaint notes that LeapLab hired a key executive from Ideal Financial as its own Chief Marketing Officer and then knew that Ideal used the information purchased from it to make unauthorized debits. Yet, the complaint alleges, the defendants continued to sell such information to Ideal.

The defendants in the case, Sitesearch Corp., LeapLab LLC; Leads Company LLC; and John Ayers, are alleged to have violated the FTC Act’s prohibition on unfair practices.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Arizona, Phoenix Division.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

FTC CRACKS DOWN ON PAYMENT PROCESSING SCAMMERS CHARGING HIDDEN FEES

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Settlements Crack Down on Payment Processing Operation that Enabled 'Google Money Tree' Scammers to Charge Consumers $15 Million in Hidden Fees
The Federal Trade Commission is continuing its crackdown on payment processing operations that enable scam artists to charge consumer accounts despite signs of ongoing fraud and unauthorized transactions.  Today, the Commission announced a proposed settlement resolving allegations that a payment processor, Process America Inc., and its owners, Kim Ricketts, Keith Phillips and Craig Rickard, used unfair tactics to open and maintain scores of merchant accounts for Infusion Media Inc., which perpetrated the “Google Money Tree” work-at-home scheme.  Using these merchant accounts, Infusion Media charged more than $15 million in unauthorized charges on consumers’ debit and credit card accounts.

Payment processors and Independent Sales Organizations (ISOs) enable merchants to charge consumers’ credit cards for products and services.  In exchange, payment processors and ISOs get paid for each payment transaction the merchant processes.

In June 2009, the FTC charged the Infusion Media defendants  with falsely claiming that consumers could earn $100,000 in six months, misrepresenting an affiliation with Google, and tricking consumers into signing up for automatic monthly charges that would continue until the consumer took affirmative steps to cancel.

The complaint against Process America alleges that the defendants knew or should have known that they were processing charges that consumers had not authorized.  Evidence that consumers were being charged without their permission included plainly deceptive statements on merchant websites, notices that the merchant should be placed in Visa and MasterCard chargeback monitoring programs, and chronically excessive chargeback rates – the percentage of charges that are challenged by consumers and result in the charges being reversed.   From 2008 through 2009, the defendants opened and maintained 131 merchant accounts through which the perpetrators processed more than $15 million in unauthorized charges on consumer debit and credit card accounts.

To keep Infusion Media’s merchant accounts open, the defendants allegedly engaged in tactics that were designed to evade fraud monitoring programs implemented by Visa and MasterCard.  These tactics included submitting merchant applications containing false information and “load balancing” – distributing transaction volume among numerous merchant accounts.  As a result, Infusion Media’s scam operated for nearly a year, and Process America continued to earn fees from its payment processing activity.
 
To resolve the allegations in the complaint, the individual defendants have agreed to separate permanent injunctions containing prohibitions and restrictions on their future payment processing activities:

Rickard is banned from payment processing and acting as an ISO.  He is prohibited from acting as a sales agent for any client engaged in (a) unfair or deceptive business practices; (b) certain categories of high-risk activities, including negative-option marketing (where the seller interprets consumers’ silence or inaction as permission to charge them), money-making opportunities, credit card or identity theft protection, timeshare resale services, buying clubs, medical discount plans; or (c) conduct that has qualified a client for a chargeback monitoring program.
Rickard is also prohibited from acting as a sales agent for any client without first screening them for unfair or deceptive business practices.  The order imposes a judgment of more than $184,000 that will be suspended based on his inability to pay.  The full judgment will become due immediately if Rickard is found to have misrepresented his financial condition.
Ricketts and Phillips are prohibited from acting as payment processors, ISOs, or sales agents for any client engaged in (a) unfair or deceptive business practices; or (b) certain categories of high-risk activities certain categories of high-risk clients.  They also are barred from acting as a sales agent for any client without screening and monitoring them for unfair or deceptive business practices.
In addition, Process America’s Chief Restructuring Officer has agreed to recommend and seek authority from the United States Bankruptcy Court for the Central District of California to enter into the proposed settlement with the FTC.  Under the proposed settlement:

Process America is prohibited from payment processing or acting as an ISO or sales agent for any client engaged in negative-option marketing or unfair or deceptive business practices, and from failing to screen, monitor, and promptly investigate clients for such practices.
The orders prohibit all of the defendants from selling or otherwise benefitting from consumers’ personal information, and failing to properly dispose of customer information.

The Commission vote authorizing the staff to file the complaint and approving the proposed consent judgment was 4-0.  The proposed settlement with Process America is subject to the United States Bankruptcy Court for the Central District of California’s approval of a Federal Rule of Bankruptcy Procedure 9019 Motion for Compromise.  The proposed consent judgments with Process America and the individual defendants are also subject to court approval.

NOTE:  The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  Consent judgments have the force of law when approved and signed by the District Court judge.