Have you ever wondered how scammers even manage to charge money to your credit card? Someone has to process those payments – and today we look at what happens when that person ignores the rules.
The Federal Trade Commission has asked a federal court to ban Cliq, Inc. (formerly Cardflex, Inc.) and its operators for systematically violating their 2015 settlement with the agency. The FTC alleges that Cliq continued to process payments for fraudulent merchants despite having a warrant to screen for exactly this type of activity.
The background: a 2015 settlement ignored
In 2015, Cliq (then called Cardflex) and its operators – CEO Andrew Phillips and Chief Technology and Security Officer John Blaugrund – settled FTC charges that they illegally processed approximately $26 million in unauthorized consumer charges for a company called I Works.
That settlement required Cliq to take reasonable steps to screen customers and prevent processing by deceptive merchants. According to the FTC, that was not the case.
What the FTC claims
The FTC’s contempt motion alleges that Cliq violated multiple provisions of the 2015 order while processing for companies that were expressly prohibited. Some of these traders have been separately charged with crimes related to this processing.
Specific allegations include:
- Vendors on the MATCH list: Hundreds of millions of dollars processed for at least three customers on Mastercard’s “Member Alert To Control High” (MATCH) list – merchants fired for violations including excessive chargebacks
- To help customers avoid detection: Helped clients avoid fraud monitoring programs with banking and credit card networks
- Insufficient screening: Processed for high-risk clients without reasonable efforts to determine whether it was misleading
- Do not monitor: Did not adequately monitor client activity to detect deceptive practices
$26 millionOriginal violations from 2015
What the FTC wants
The FTC has asked the court to:
- Impose at least $52.9 million in consumer compensation
- Amend the 2015 order to permanently ban Phillips and Blaugrund from the payment processing business
- Appoint a trustee to ensure that Cliq complies with the requirements of the order
Director Christopher Mufarrige of the FTC Bureau of Consumer Protection said, “Cliq and its operators have flagrantly violated an FTC order requiring reasonable steps to prevent and detect fraud. We will not hesitate to hold accountable companies that ignore red flags and disrupt the fair functioning of the U.S. payments system.”
The bigger picture
This case illustrates something important: scammers do not operate in isolation. They need banks, payment processors and other infrastructure to actually accept money from consumers.
When payment processors look the other way – or actively help fraudulent merchants avoid detection – they become enablers. High chargeback rates are a clear warning sign that consumers are disputing charges because they didn’t get what they paid for (or didn’t approve the charge at all).
If you have been charged by a fraudulent company
If unauthorized charges have been made to your credit card by a company you do not recognize or have authorized:
- Immediately dispute the charge with your credit card company
- Report the company to the FTC at ReportFraud.ftc.gov
- Check your credit reports for other suspicious activity
If you’re now facing debt from charges you didn’t authorize or services that were never provided, understand that you have options. The Find Your Path quiz can help you discover which approach might work for your situation.
Key Takeaways
- Payment processor Cliq allegedly violated 2015 FTC settlement by processing for fraudulent merchants
- The FTC is seeking $52.9 million in consumer relief and a permanent ban on the operators
- High chargeback rates are a warning sign that payment processors should take into account
- Scam companies rely on willing payment processors to conduct business, which can hold them accountable
Frequently asked questions
What is Cliq and what did they do?
Cliq (formerly Cardflex) is a payment processor that handles credit card transactions for merchants. The FTC alleges that they violated a 2015 settlement by processing payments for fraudulent companies instead of screening them as required.
What is the MATCH list?
MATCH (Member Alert To Control High) is Mastercard’s list of merchants terminated for violating card brand rules, including having excessive chargebacks. Payment processors are not allowed to work with merchants on the MATCH list.
Why are payment processors important for consumer protection?
Payment processors are gatekeepers: they allow merchants to charge credit cards. When they screen for fraud and refuse to identify suspicious sellers, they can prevent scams before they happen. If they don’t, they cause harm to consumers.
What should I do if I see unauthorized charges on my credit card?
Immediately dispute the charge with your credit card company. Federal law limits your liability for unauthorized charges. Also report the company to the FTC at ReportFraud.ftc.gov.
Can I get my money back after a fraudulent charge?
If you promptly dispute unauthorized charges with your credit card company, you are generally protected. The FTC’s action against Cliq is also aimed at consumer relief, although individual recovery depends on the outcome of the case.
(Source: Federal Trade Commission)
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