The Federal Trade Commission continued its crackdown on credit card rate reduction scams by adding eight new defendants to a case the agency brought last year, including a payment processor it alleges assisted in the fraud.
The FTC filed an amended complaint against the defendants behind the firm Treasure Your Success (TYS), which allegedly made deceptive “cardholder services” robocalls, promising to lower consumers’ credit card rates in exchange for an upfront fee as high as $1,593.93.
Among the additional defendants named in the amended complaint is a company called Newtek Merchant Solutions, and its former president Derek Depuydt. According to the complaint, they approved TYS for a merchant account without performing customary reviews (such as obtaining telemarketing scripts, as required by their own procedures) and despite clear warning signs of fraud. They continued to process credit card transactions for TYS, despite knowing that it had high charge-back rates, had fraud alerts on its credit reports, and was on MasterCard’s fraud monitoring program.
The FTC filed its original complaint against TYS in November 2012, as part of a joint law enforcement effort against companies that allegedly made deceptive “cardholder services” robocalls. The FTC’s amended complaint adds several counts against the new defendants, including: 1) making false representations during the sale of credit card interest rate reduction services; 2) falsely promising not to charge a fee until the consumers have received the promised savings; 3) billing consumers without their authorization; 4) violating the Telemarketing Sales Rule by misrepresenting material aspects of debt relief services; 5) violating the Do Not Call Rule; 6) charging an advance fee for debt relief services; 7) making unlawful prerecorded messages; and 8) assisting and facilitating deceptive and abusive telemarketing acts and practices.
The Commission vote authorizing the staff to file the amended complaint was 4-0. Staff filed for leave to file the complaint on June 17 and the judge authorized filing the amended complaint on June 18. The Commission’s action is in the U.S. District Court for the Middle District of Florida, Orlando Division. The FTC would like to thank the Orlando Police Department for its assistance in bringing this case.
The amended complaint adds several new defendants to the case, which now include: 1) WV Universal Management, LLC, also doing business as Treasure Your Success; 2) Global Financial Assist, LLC; 3) Leading Production, LLC; 4) Willy Plancher, individually and as a member of WV Universal Management, LLC, Global Financial Assist, LLC, and Leading Production, LLC; 5) Valbona Toska, also known as Val Jones, individually and as a member of WV Universal Management, LLC, Global Financial Assist, LLC, and Leading Production, LLC; 6) HES Merchant Services Company, LLC; 7) Business First Solutions, Inc.; 8) VoiceOnyx Corp.; 9) Hal E. Smith, also known as H.E. Smith, Harold E. Smith, and Howell E. Smith, individually and as an officer of HES Merchant Services Company, LLC; 10) Jonathon E. Warren, individually and as an officer of Business First Solutions, Inc., and VoiceOnyx Corp.; 11) Ramon Sanchez-Ortega, also known as Ramon Sanchez and Ramon Ortega; 12) Universal Processing Services of Wisconsin, also doing business as Newtek Merchant Solutions; and 13) Derek Depuydt, individually and as an officer of Universal Processing Services of Wisconsin. – Source
This action marks the second is short order where the payment processor has been added in a debt relief operation. See Innovative Wealth Builders in FTC News Again With Independent Resources Network.
According to the amended complaint filed on June 18, 2013, the payment processor should have been alerted to the risks and potential fraud.
Newtek provided credit card payment processing services to TYS. Depuydt personally oversaw all of the accounts funneled by Smith into Newtek, and approved TYS’s application to use Newtek’s services. Newtek’s payment processing services enabled the charges on consumers’ credit card accounts to clear through the credit card network.
During the period between November 2011 and July 2012, Newtek processed credit card charges totaling approximately $2.8 million. Without Newtek’s and Depuydt’s assistance in providing the payment processing services, it would have been impossible for the TYS Defendants to charge consumers the fees for the CCIRRS.
Newtek received a substantial fee for its credit card payment processing services. Newtek also withheld up to twenty percent (20%) of the gross sales every month and placed the funds in a reserve account used to cover consumer chargebacks.
Newtek and Depuydt substantially assisted and facilitated the TYS Defendants’ violations of the TSR by providing them the credit card payment processing services.
Newtek and Depuydt knew, or consciously avoided knowing, that the TYS Defendants were engaged in the unlawful practices described below in paragraphs 64 through 75. A) By November 2011, when Plancher and Toska applied for processing services through Smith, Newtek and Depuydt already knew that many of Smith’s accounts were connected to operations that were likely engaged in fraud. B) Plancher’s and Toska’s application for a merchant account showed that they were engaged in telemarketing. C) Though Newtek’s procedures required the applicants to produce their telemarketing scripts and contracts, they did not do so, and Newtek simply ignored this deficiency, which would have alerted them to the TYS Defendants’ TSR violations. D) The credit reports obtained by Newtek and Depuydt during the application process stated specifically that Plancher and Toska had substantial debts and serious delinquencies and were at high risk for fraud.
Once Plancher and Toska obtained a merchant account, additional indicia of fraud surfaced quickly. A) By January 2012, after only two full months of operation, TYS was already incurring substantial chargebacks, the rate of which continued to increase. B) MasterCard put TYS on a monitoring list and investigated it for fraud. C) Newtek and Depuydt knew of the excessive chargebacks and the action by MasterCard but took no action other than to increase the amount of TYS’s revenue that they held as a reserve against chargebacks.
In May 2012, Plancher and Toska applied for another merchant account using the name “Treasure Your Success 2.” Again, Newtek and Depuydt obtained and reviewed individual credit reports showing substantial delinquent debts and specifically labeling Plancher and Toska as high risk for fraud. Again, Newtek and Depuydt failed to obtain and review the applicants’ telemarketing scripts and contracts as required by Newtek’s company procedures. Despite these indicia of fraud and the pattern of excessive chargebacks from the first TYS merchant account, Newtek and Depuydt approved the application again. Newtek never took any action in response to TYS’s fraudulent activities other than to increase the amount it withheld from TYS’s revenue. – Source