The FTC and the State of Ohio sued a third party payment processor that engaged in processing payments for third party merchants engaged in deceptive practices and consumer fraud, as well as telemarketers in violation of the FTC Act, the TSR, and the Ohio CSPA.
The Federal Trade Commission and the State of Ohio filed a complaint seeking a permanent injunction and other equitable relief against Madera Merchant Services and B&P Enterprises. The United States District Court for the Western District of Texas issued a temporary restraining order, asset freeze, and other equitable relief, as well as an order to show cause why a permanent injunction should not be issued.
Madera Merchant Services and B&P Enterprises operate a third-party processing scheme that uses remotely created payment orders or remotely created checks to withdraw money from consumers’ accounts on behalf of third-party merchants. Madera and B&P routinely withdrew funds from consumers for merchants that were engaged in fraud or deceptive marketing. The district court stated that the defendants also routinely provided payment processing services to telemarketers in violation of the TSR, which expressly prohibits collecting payments in connection with telemarketing sales.
The district court noted that the defendants had processed more than $8.6 million in remote check processing orders generated through telemarketing since June 2016, the date when the TSR prohibition on the use of RCPOs in telemarketing transactions went into effect. The district court then stated that the defendants had opened numerous business checking accounts under various assumed names with numerous banks and credit unions. The court noted that the defendants routinely failed to disclose to the financial institutions that the accounts would be used to process payments.
The court then found that there was good cause to believe that the defendants had engaged in and were likely to engage in acts that violated § 5 of the FTC Act and that the FTC and the State of Ohio were likely to prevail on the merits of the action. The court continued, finding that there was good cause to believe that immediate and irreparable damage to the court’s ability to grant effective relief for consumers, in the form of monetary restitution or refunds, would occur from the sale, transfer, destruction, or concealment by the defendants of their assets or records unless the court issued an immediate injunction restraining the defendants from engaging in such behavior.
The court concluded by weighing the equities and considering the likelihood of success on the merits by the FTC and the State of Ohio. The court found that the plaintiffs were likely to prevail, and the balance of the equities weighed in favor of granting a temporary restraining order with an asset freeze, the appointment of a temporary receiver, and immediate access to the defendants’ business premises and records. The court then granted the temporary injunction and issued an order directing the defendants to show cause why a permanent injunction should not be granted.
You can read the full decision here.
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