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Tuesday, August 4, 2020

Government eyes trained on payments

The COVID-19 pandemic has inhibited or slowed down many aspects of life these days; however, that doesn't appear to be the case with government agencies charged with monitoring and taking action against companies deemed rogue actors in the payments sphere.

In July, The Green Sheet reported on one such action brought by the FTC and the New York Attorney General against merchant cash advance provider RCG Advances and its executives. That company is alleged to have engaged in deceptive marketing and unfair collection practices, including threats of violence to compel business owners to repay money. Members of GS Online's MLS Forum have been discussing several other cases of note recently, including those involving Madera Merchant Services, Northern Leasing Systems and V Internet Corp.

Madera et al

In June 2020, Madera Merchant Services LLC, B&P Enterprises LLC, and their owners Bruce C. Woods and Patricia Woods agreed to be permanently banned from the payment processing business to settle charges against them in a case filed by the Federal Trade Commission in 2019.

Previously, at the request of the FTC and the State of Ohio, a federal court in El Paso, Texas, issued temporary restraining orders against Madera, along with associated parties B&P Enterprises, Educare Centre Services and Prolink. The parties, along Madera officer Victor Rodriguez, were accused of running a bogus credit card interest rate reduction scheme that bilked more than $13 million from consumers who were struggling with credit card debt.

The FTC and the Ohio Attorney General alleged in their complaint against Madera and B&P Enterprises that the companies generated and processed remotely created payment orders or checks that allowed many unscrupulous merchants, including deceptive telemarketing schemes, to withdraw money from their victims' bank accounts. The FTC's Telemarketing Sales Rules specifically prohibits the use of RCPOs in connection with telemarketing sales, the FTC additionally noted.

The telemarketing operations that Madera and B&P Enterprises supported included, among others, student debt relief schemes American Financial Benefits Center and Impetus Enterprise, and the credit interest reduction scheme operated by Educare and Tripletel.

"This case is another reminder for consumers to stay away from any company promising to reduce debt for an advance fee," said Andrew Smith, Director of the FTC's Bureau of Consumer Protection. "The FTC will continue to pursue such schemes aggressively, and hold accountable payment processors that are complicit in the illegal conduct."

Northern Leasing

Also in June, New York State Attorney General Letitia James prevailed in the New York State Supreme Court in a lawsuit brought against Northern Leasing Systems Inc.

"The sweeping decision will void what are potentially hundreds of thousands of fraudulently-induced credit card equipment leases; vacate approximately 30,000 default judgments acquired against out-of-state fraud victims in New York City Civil Court; and dissolve Northern Leasing Systems, Inc." the attorney general's office said in a statement about the case. "Attorney General James' victory will also force Northern Leasing and related entities, Northern Leasing's chief executive officer, and others who engaged in the fraudulent scheme to provide restitution to small business owners who were deceptively and illegally induced into abusive and overpriced financing leases for inexpensive credit card processing equipment."

Filed in April 2016, the lawsuit alleged that New York company Northern Leasing Systems and several of its affiliated companies, as well as principal Jay Cohen, also known as Ari Jay Cohen, and others involved in Northern Leasing's operations "targeted small, family-owned businesses, such as flower shops, hair salons, automotive repair shops, bodegas, delis, restaurants, and bars, and trapped them into overpriced, never-ending lease agreements for credit card processing equipment. The lawsuit further alleged that Northern Leasing abused the judicial process by suing to collect on these leases in the Civil Court of the City of New York. Deputy Chief Administrative Judge George J. Silver — as a co-petitioner in the proceeding — sought to vacate default judgments obtained by fraud, deception, or other improper means," the attorney general's office recounted.

About the victory, Attorney General James said, "This decision will put much-needed money back into the pockets of small business owners around the country, which is especially vital as owners and their families are reeling from the impacts of the COVID-19 public health crisis. This victory will not only provide direct relief to victims of Northern Leasing's dishonest practices by canceling future payments on these fraudulent leases, but will also award restitution to defrauded restaurant owners, shopkeepers, and thousands of other small business owners who entered into fraudulent lease agreements."

V Internet Corp.

Also in June, the Department of Justice reported that Gareth David Long, 41, of Las Vegas, was sentenced to serve 70 months in prison for "running a scheme to steal millions of dollars from hundreds of thousands of consumers."

The sentencing by Judge Andrew Gordon of the U.S. District Court for the District of Nevada followed Long's Nov. 2019, guilty plea to wire fraud and aggravated identity theft charges, the DOJ noted. As part of his guilty plea, Long admitted that he created and deposited checks drawn on the checking accounts of more than 375,000 victims without authorization during a six-month period in 2013.

"Although Long had no authorization to charge the victims' accounts, he represented to victims' banks that the victims had authorized the debits," the DOJ wrote. "When victims called to complain about the charges, Long instructed employees working for him to tell the victims that they had authorized the charges in connection with an online payday loan application. Many of the victims were elderly."

The DOJ added that Long used the proceeds of this scheme to purchase a ranch and 23 acres of land in Texas, three airplanes, a fire truck, and construction and farm equipment, as well as to pay other personal expenses.

The total amount Long attempted to lift was approximately $22 million, but about half of that was rejected by the victims' banks. The court issued a forfeiture money judgment of the more than $11.2 million, and Long forfeited the Texas ranch and land.

For discussion of these and other government actions against payment enterprises accused of wrongdoing, visit the MLS Forum access via the Forums tab on our homepage, www.greensheet.com . end of article

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