E-Commerce News – January 6, 2012 Reply

E-Commerce News provided by BuckleySandler LLP for informational purposes only, and should not be construed as legal advice on any subject matter.

January 6, 2012

FTC Obtains Agreement from Payment Processor to Prohibit Use of New Payment Method . On January 5, the Federal Trade Commission (FTC) announced a settlement with a payment processor and two of its principals that will prohibit the company from using a new payment method, through which accounts were debited without account-holder consent. The FTC alleged that the company actively promoted the method as a way to avoid scrutiny associated with other payment methods, and ignored red flags – such as payment-rejection rates exceeding 80 percent – that its merchant customers were seeking to defraud account-holders. As a result, according to the FTC, consumers incurred significant costs, including for overdraft fees. In addition to banning the use of this payment process, the settlement requires, among other things, that the company monitor client return rates and investigate rates exceeding 2.5 percent. For a copy of the FTC release, please seehttp://www.ftc.gov/opa/2012/01/landmark.shtm .

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