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A Thing
Issue 06:01:02

Industry Update

AmEx strikes three more U.S. card-issuing partnerships

IPayment to become a privately held company

Smart cards advance in Canada


The 'gray' areas of Triple DES

By Tracy Kitten,

2005 holiday shopping season tepid but not tragic

Industry Leader:
Sherry L. Friedrichsen

Born into the financial services industry


Washington honing its focus on payments space

By Patti Murphy

An urgency resolution

By Ken Musante

QSRs: Service, service, service

By Aaron Slominski


Street SmartsSM:
A look at the free equipment trend

By Michael Nardy

The termination gamble

By Adam Atlas

Combine product offerings to maximize profit potential

By Tommy Glenn

New year, new computer

By Joel Rydbeck

New Products

Prepaid debit: One hot potato

A versatile POS terminal for versatile merchants

Company Profiles



Think outside the box

Technology time wasters



Resource Guide


Demand for written retraction

In September 2005 The Green Sheet published an article by Patti Murphy of The Takoma Group titled "FTC Has ISOs in Its Sights" (Sept. 26, 2005, issue 05:09:02).

This article was based on information provided at the Western Payments Alliance (WesPay) Payments Symposium 2005 and in discussion with a conference presenter, Laureen France, a Federal Trade Commission (FTC) employee. At the WesPay conference Ms. France stated the allegations of a complaint against Universal Processing Inc., in the language of the complaint.

In addition, The Green Sheet published a second article written by David H. Press of Integrity Bankcard Consultants Inc., titled "Processing for Online Pharmacies: Going, Going ... Gone?" (Nov. 14, 2005, issue 05:11:01). This article was sourced to a Sept. 7, 2005 FTC settlement announcement.

In these two articles many references are made to the company Universal Processing, the subject of an FTC probe, with which the FTC reached a settlement that was published Sept. 7, 2005.

Although all who care to view this FTC action can read the settlement, it is important to point out that the settlement announcement includes the following note that may have been useful to have included in the second article:

"Note: A stipulated permanent injunction and final order is for settlement purposes only and does not constitute an admission by the defendant of a law violation."

Universal Processing believes that the two articles have many factual errors, and The Green Sheet has received a demand for a written retraction of these two articles.

After reviewing the demand and all the material concerning the complaint filed by the FTC against defendant Universal Processing, The Green Sheet feels that the concerns voiced by Universal Processing through its attorney are best expressed in its own language, which follows:

"After reviewing the substantive content of Ms. Murphy and Mr. Press' articles, I can only surmise that the articles' glaring factual misrepresentations and extensive deficiencies are the result of a malicious attempt by The Green Sheet to undermine my client's competitive advantage, substantial goodwill and well-earned reputation.

"A) Ms. Murphy's article

"Paragraph 2 states that Laureen France is an attorney for the FTC. She is not. Rather, Ms. France is employed by the FTC as one of its many investigators. Paragraph 4 provides readers with a description of the compromise reached between my clients and the FTC as a forfeiture of my clients' 'ill gotten gains.' Aside from the statement's inflammatory nature and its obvious implication of fraud and devious conduct on the part of my clients, The Green Sheet chose to utilize such profoundly damaging language without benefit of quotes or verifiable sourcing.

"The sentence which follows states that my clients' compromise with the FTC was made without admission of guilt. Paragraph 5, again reporting a damaging statement allegedly made by a vague, unverifiable source without the benefit of quotations, is technically correct, thus it is not subject to my clients' legal right to a retraction.

"Paragraph 6 provides the clearest proof of the malice by which your article was skewed against my clients' interests. Citing no sources at all, but offering it to the readers as fact, is the statement, 'Making matters worse, no due diligence was performed when Universal signed on Pharmacycards. No one at Universal ever met with the folks who operated the Web site or required that they complete a standard payment processing application.'

"This statement was printed by your publication with unequivocal and complete disregard for any semblance of truth whatsoever. The following, undisputed factual summary outlines the due diligence performed by my clients with respect [to] the Pharmacycards account with a brief explanation of the application process. Please feel free to utilize the entirety of this summary when printing your retraction:

"The application

"The incomplete standard application referenced in the article is one obtained by Universal and submitted to the processing banks for underwriting and approval. With the Pharmacycards account, the application, photocopied passport, prior processing statements, and supporting documentation were submitted to processing banks for underwriting and approval.

"Universal regularly submits applications to processing banks and it is entirely up to each bank, in its sole and absolute discretion, whether to accept and underwrite the account or return it to Universal with a request for additional information.

"With respect to Pharmacycards, the processing banks accepted the application as complete for underwriting purposes and began processing its transactions. Once the application was approved, Pharmacycards, in accord with Universal's regular business practices, was provided all of the direct banking information.

"Good faith and due diligence

"By no means could Universal have seen through the scheme perpetuated by Pharmacycards. Universal was provided a complete marketing package with a discount membership card which purported to be a sound, consumer-oriented product at a reasonable price point.

"Similar medical/prescription discount packages are legitimately sold by a wide army of organizations, some of which Universal had previously obtained processing for, and, until Pharmacycards sought to capitalize on a legitimate consumer product for fraudulent purposes. Universal's experience with such clients was impeccable.

"Additionally, Pharmacycards provided both Universal and the processing bank with its statements from two other processing institutions verifying that the Pharmacycards package had been processing at high volume within reasonable chargeback and refund thresholds.

"As with all previous clients, Universal did everything in its power to verify Pharmacycards legitimacy, including flying a legal representative to the U.K. to meet with Pharmacycards CEO, David Turner personally and inquiring with industry colleagues to learn if any relevant information was available on Pharmacycards product or principals.

"History of Universal's relationship with Pharmacycards

"Once the processing bank approved and underwrote the account it began to process the orders submitted by Pharmacycards. Soon after processing began, Universal noticed a higher number of refunds and chargeback's that would be indicative of a similar type product.

"As this trend was inconsistent with the processing statements provided by Pharmacycards for underwriting, upon receipt of this information, Universal immediately conferenced the processing bank and David Turner for clarification and resolution of the issue.

"Mr. Turner emphatically denied any problems on his end which might have been the cause for the deviation and his position was further supported by the bank when it admitted it inadvertently utilized the billing descriptor 'Tel Order' rather than '' as had been requested by the client.

"Traditionally, consumers ordering a product expect to see the product or company name listed on their bank statements or upon inquiry with their banking institution. Seeing or hearing the name 'Tel Order' virtually screams out fraud to a consumer, who, after purchasing a product and failing to recognize the billing descriptor to which the product correlates, will infer the worst and request a refund or chargeback from their banking institution.

"Universal recognized this misapplied descriptor as the obvious culprit in the refund/chargeback issue and requested the proper Pharmacycards descriptor to be utilized by the processing bank. This descriptor change took the bank over a week to implement, causing, in Universal's best business judgment, the unusually high refund and chargeback ratios.

"Virtually concurrent with the bank's modification to the proper billing descriptor, the processing bank scaled back its reporting functionality to eliminate agent reporting. Thus, Universal was completely in the dark with respect to refund and chargeback ratios and had no means by which to monitor them.

"Despite repeated, and often desperate, requests for reporting from the bank, Universal was provided no such relief. Universal had no way of knowing whether the descriptor change resolved the issue and, absent contrary information from the bank, assumed it had.

"With the bank's agent reporting feature eliminated, Universal sought a new bank as a replacement for the Pharmacycards processing. When the account was migrated to the new processor, with the proper billing descriptor and daily reporting accessible by Universal, the chargeback and refund ratios reported back were well above normal, thus it became immediately apparent that it was not a descriptor issue as Universal had previously believed, rather, the problem was clearly on the client's end.

"Upon receipt of this information from the new processor, Universal immediately contacted Mr. Turner and demanded that he overnight every consumer signature approving the Pharmacycards transactions he had previously submitted to the banks.

"The signatures were promised, and the next day when the overnight package was not received, Universal requested that the new processor immediately terminate processing on the account and additionally requested that both banks immediately issue refunds to every consumer billed. The degree of Universal's integrity throughout the Pharmacycards processing term is well supported by the facts and documentation.

"Paragraph 7 contains multiple false and/or misleading statements, which, although quoted and directly sourced to Ms. France, were done so under the false pretenses of her embellished credentials ... [Investigator not Attorney].

"Although paragraph 8 is technically correct, nowhere is your publication's malevolence for my clients made more clear.

"Paragraphs 9 through 12 of Ms. Murphy's article continues on with even more blatantly false statements, largely unsubstantiated and without reference to factual sources, purported to be a mere recapitulation of previously verified, or properly sourced, factual data. ... One thing is certain; no company, consumer or agency has been victimized more financially due to Pharmacycards' fraud than Universal; yet rather than innocent victim, your article paints the malicious picture that Universal was in collusion with Pharmacycards in its massive ring of fraud.

"B) Mr. Press' article

"Although the content, context and purpose of Mr. Press' [The] Green Sheet article is far less inflammatory and malicious than that of Ms. Murphy's, just the same, the false, unverified nature of the facts on which Mr. Press relied have substantially damaged my clients' goodwill, competitive advantage and earnings, thus, demand is hereby made that in addition to the retractions demanded above, the following falsely reported facts are retracted in a separate, equally visible formal retraction by your publication:

"'Universal ... knew or should have known that consumers did not authorize the debits.'

"As the facts summarized above prove, Universal had no way of knowing, nor should it have known, that consumers did not authorize the debits, and, immediately upon obtaining knowledge of this fact, Universal directed each processor to terminate the Pharmacycards account.

"'Universal made the unauthorized debits on behalf of a business known as'

"Universal did not make unauthorized debits. Pharmacycards initiated unauthorized debits which were then processed by the processing banks handling the account."

Readers of The Green Sheet may find the FTC settlement with Universal Process-ing at, and further may reach Nathan J. Sheridan, Attorney for Universal Processing Inc. and Reyhan Pasinli, at Goodman, Sheridan & Roff LLP at 949-274-8962.

Article published in issue number 060102

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.
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