FTC says Nevada payment processor will pay $950K

FTC says Automated Electronic Checking will pay $950,000 to end payments investigation

Associated Press

NEW YORK (AP) -- The Federal Trade Commission said Wednesday that a payment processing company agreed to pay $950,000 to resolve allegations it debited money from consumers' bank accounts without their permission.

The agency said Automated Electronic Checking Inc. of Reno, Nev., either knew its clients were misleading consumers and taking money from their accounts without permission, or it should have known that those transactions were taking place. It said in some cases AEC debited the accounts of consumers who had been deceived. Some thought they were applying for credit cards when they were actually being enrolled in an online "shopping club" with fees.

The money will be returned to consumers, the FTC said. The settlement bars AEC and its top executives, John Lawless and Kenneth Turville, from processing electronic payments.

Companies like Automated Electronic Checking process payments between merchants and banks, and take fees for their work. According to the FTC, the company processed payments through a method that allowed it to reach into a consumer's account and debit the payment. That method is called a remotely created payment order, and the FTC said there is little monitoring of those transactions, which makes them easy to abuse.

The agency added that AEC advised merchants to use that method and told them how to avoid detection.

The settlement is taken from money AEC made by processing transactions for EdebitPay LLC and Platinum Online Group. The FTC said the company processed almost $50 million in transactions for those companies between 2008 and 2010. Those transactions were rejected at abnormally high rates.

The FTC said the company did business with banks in California, Arizona, Utah, and Delaware, and said those banks had been subject to regulatory scrutiny because of "risky practices."

The settlement was entered in a Nevada U.S. District Court on Monday. It also prohibits the company and the executives from processing payments by any means, says they cannot bill consumers or tell them they owe money, and prohibits them from referring consumers' debts to other processors for money or selling or benefiting from the personal information of consumers.

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