It seems like forever Ive been writing about Innovative Wealth Builders and all the unhappy consumers that feel for their debt relief pitch.
But it looks like the FTC has taken a step against their payment processor that could have ramifications in other parts of the debt world with payment processors and escrow companies.
According to the Federal Trade Commission in their ongoing crackdown on payment processors that turn a blind eye to fraud, the agency sued a payment processing business that allegedly assisted and facilitated a telemarketing credit card interest rate reduction scam.
In an amended complaint filed in federal court, the FTC alleged the payment processor, Independent Resources Network Corp. (IRN), knew, or consciously avoided knowing, key facts about the illegal conduct of a telemarketing scam operated by Innovative Wealth Builders, Inc. (IWB), and chose to continue profiting from processing IWB’s credit card transactions. Among the many indicators of illegal conduct that IRN allegedly ignored were IWB’s “alarmingly high chargebacks rates.”
A chargeback occurs when a consumer disputes a charge to a credit card and the charge is reversed. The average chargeback rate in the United States is well below one percent, meaning fewer than one out of every 100 credit card transactions is reversed as a result of a chargeback. According to the FTC’s amended complaint, IWB’s chargeback rate averaged above 20 percent for several years, and exceeded 40 percent in multiple months.
“Despite knowing, or consciously avoiding knowing, the illegal nature of the IWB Defendants’ business, IRN processed millions of dollars of credit card transactions for IWB, thereby earning considerable fees for itself while allowing the IWB Defendants to harm thousands of consumers who purchased the IWB Defendants’ bogus credit card interest rate reduction services,” the complaint states.
The amended complaint alleges that IRN is liable for assisting and facilitating deceptive and abusive telemarketing acts or practices in violation of the Telemarketing Sales Rule.
According to the amended complaint, IRN, the payment processor should have been aware of the unhappy consumers related to the IWB service. The FTC laid out their position about going after the payment processor in the complaint.
For example, IWB’s merchant application with IRN stated that 100% of the credit card transactions IWB was going to submit to IRN for processing would be “MOTO” (i.e., “mail order, telephone order”) transactions.
At the time IRN began processing for IWB, and throughout the time that IRN processed for IWB, IRN knew, or consciously avoided knowing, that IWB was selling debt relief services.
For example, before it began processing for IWB, IRN reviewed IWB’s website, which stated that IWB was offering a program to reduce consumers’ debt obligations, enhance their credit, save money on their interest payments, and get them out of debt in half the time.
At various times during which IRN processed for IWB, IWB sent IRN copies of company documents including, but not limited to, telemarketing scripts and samples of the IWB Defendants’ “financial plan.”
Throughout the time period that IRN processed for IWB, IRN knew, or consciously avoided knowing, that IWB was collecting an up-front fee for its services.
At the time IRN began processing for IWB, IRN was aware that IWB had a variety of complaints on consumer websites.
At the time IRN began processing for IWB, IRN was aware that IWB had an “F” rating with Better Business Bureau of West Florida, Inc. (“BBB”).
Since at least 2010, BBB’s website, which IRN accessed at various times, has stated that:
BBB has received a pattern of complaints [against IWB] concerning misrepresentation in selling practices, failure to honor promised refunds in a timely manner and failure to issue refunds after being told that a refund would be issued.
Throughout the time period that IRN processed for IWB, IRN received thousands of copies of chargeback disputes initiated by dissatisfied consumers.
In numerous chargeback disputes received by IRN, consumers stated that IWB had not reduced their credit interest rates, saved them money on their credit card debts, or helped them pay off their debts faster.
In numerous chargeback disputes received by IRN, consumers stated that IWB made unauthorized charges to their credit cards.
In November 2010, IRN was aware that IWB was the subject of an investigation by the Florida Attorney General’s Office that was carried out pursuant to Florida’s Deceptive and Unfair Trade Practices Act.
IRN was aware since at least November 2010 that MasterCard identified IWB as being in the highest fraud category—“tier 3” or “high fraud alert”—under MasterCard’s fraud control program because of IWB’s number of fraudulent transactions, volume of fraudulent transactions, and ratio of fraud-to-dollar sales.
IRN received multiple fraud alerts from Discover regarding IWB.
In July 2012, IRN was aware that the IWB Defendants were the subject of an investigation by the FTC to determine whether they had engaged or were engaging in deceptive or unfair acts or practices in the advertising, marketing, or sale of debt relief services.
Rather than cease processing for the IWB Defendants after the illegal nature of their business was apparent, IRN chose to continue profiting from processing IWB’s credit card transactions.
Although IRN did not cease processing for the IWB Defendants, it did respond to the numerous indicators of the illegal nature of their business by seeking to protect its own interests. Specifically, IRN increased the percentage it withheld from transactions processed for IWB, which IRN held in a reserve account. IRN intended for the funds in the reserve account to compensate IRN for chargebacks and other potential liabilities. The amount held by IRN in the reserve account was nearly $700,000 at the time Plaintiff filed the instant action.
IRN’s processing services permitted the IWB Defendants to access the credit card networks and charge millions of dollars of fees to the credit cards of consumers who purchased the IWB Defendants’ “services.”
During the time period that IRN processed for IWB, IRN assisted IWB in challenging chargeback disputes.
IRN reviewed IWB’s responses to chargeback disputes and made recommendations on how to defeat chargeback requests.
IRN assisted IWB in implementing a policy of obtaining signed proofs of delivery for documents sent to consumers after IWB charged them. The proofs of delivery were used to defeat chargeback requests by claiming that consumers received unreturned merchandise. IRN provided this assistance despite knowing that IWB was selling debt relief services, not merchandise.
IRN assisted IWB by instructing IWB to structure sales transactions such that an initial charge of a relatively small percentage of the overall fee was made prior to a subsequent charge for the remainder of the overall fee.
In 2011, IRN further assisted IWB by entering into an agreement, similar to a line of credit, whereby IRN would advance cash to IWB with repayment to be made from future money processed by IRN for IWB.
IRN made numerous cash advances to IWB.
The cash advances made by IRN to IWB totaled hundreds of thousands of dollars.
IRN profited from the IWB Defendants’ Wrongful Acts
In exchange for IRN’s processing services, IWB paid IRN a percentage of each transaction that was processed. IWB also paid IRN other fees including, but not limited to, fees for chargebacks. IRN further profited from the cash advances that it made to IWB.
Despite knowing, or consciously avoiding knowing, the illegal nature of the IWB Defendants’ business, IRN continued to process millions of dollars of credit card transactions for IWB, thereby earning considerable fees for itself while allowing the IWB Defendants to harm thousands of consumers who purchased the IWB Defendants’ bogus credit card interest rate reduction services. – Source
What Could Be the Implications for Global Client Solutions and Meracord / NoteWorld?
It seems some of the same assertions could be made against debt relief escrow companies like Global Client Solutions and Meracord / NoteWorld as well. I wonder if that is to come.