he Federal Trade Commission (FTC) has filed a complaint against three payment processors, charging them with providing assistance to fraudulent telemarketers and several additional related offenses.

First American Payment Processing, Inc., CET Corp., Check Processing Center, LLC and individual defendants allegedly processed electronic payments for telemarketers who deceptively sell advance fee credit cards or who engage in other deceptive or abusive telemarketing practices, according to the FTC.

The Arizona-based defendants, Carl Towner, Matthew Robinson and their spouses, are named in the complaint as principals of all three companies; they have also done business as CheckGateway.com and edebit.com, according to FTC documents.The complaint was filed in U.S District Court, District of Arizona, Phoenix Division on Jan. 13, 2004.

In the complaint, the FTC said the defendants violated the Telemarketing Sales Rule (TSR) by providing "substantial assistance and support to numerous client telemarketers" whom the defendants either knew or consciously tried not to know were using abusive and deceptive telemarketing practices. The FTC said the defendants violated the law by processing those fraudulent transactions through the Automated Clearing House (ACH) Network. Because the defendants have agreements with financial institutions to adhere to NACHA operating rules that govern the ACH, they are also in breach of contract.

The complaint was filed in U.S District Court, District of Arizona, Phoenix Division on Jan. 13, 2004. The court entered a stipulated preliminary injunction order on January 20 prohibiting the corporate defendants and their principals from continuing to process ACH transactions for entities engaged in similarly fraudulent endeavors. This action is just one the FTC has taken recently against ISOs and payment processors. In July, the FTC filed charges against Electronic Financial Group (EFG) and its principals for their role in processing transactions for fraudulent telemarketers seeking to drain funds from consumer bank accounts.

In January 2004, the FTC announced that Certified Merchant Services (CMS) paid $23.5 million in January 2003 to settle charges brought against it in February 2002 for not disclosing or making clear the fees it charged merchants for payment processing accounts (see "A $23.5 Million Lesson," page 72).