First Data Merchant Services LLC and a former executive agreed to pay over $40 million to settle a Federal Trade Commission claim alleging that the company processed payments and laundered credit card transactions for scams targeting hundreds of thousands of consumers.
Еx-vice president Chi “Vincent” Ko allegedly opened hundreds of fake merchant accounts and shell companies to take payments from the unwary through his former company First Pay Solutions.
FTC states that First Data received multiple “warnings and direct evidence” that Ko’s company was “permeated by fraud” since 2012 but continued to let Ko and First Pay open merchant accounts until 2014.
Daniel Kaufman, deputy director of the FTC’s Bureau of Consumer Protection commented:
First Data is paying $40 million because it repeatedly looked the other way while its payment processing services were being used to commit fraud. When companies fail to screen out fraudsters exploiting the payment processing system to steal people’s money, they’re breaking the law — and injuring consumers.
Fiserv Inc., which acquired First Data last July, said that the FTC’s claim relates to a single U.S.-based independent sales organization and that the settlement in the best interest of the company and its clients. Britt Zarling, a representative of Fiserv, said in the statement that the company remains “committed to ensuring that our business partners and merchants operate with integrity”.
The schemes First Data is accused of, applied to millions of dollars in in illegal charges to consumers’ credit and debit accounts. According to the FTC, the scheme included a work-at-home business coaching program and a debt relief telemarketing plan that each took in at least $20 million,
At the end of 2014 Wells Fargo & Co. ended First Pay’s contract and warned of “deceptive practices.” However, First Data still acquired the company’s merchant accounts in May 2015 and hired most of its employees, taking Ko on board as a vice president in January 2017, FTC alleges.
