Payment processor Universal Processing Services (UPS) of Wisconsin LLC and telemarketer Hal E. Smith, along with his company HES Merchant Services Company Inc. (HES), have been ordered to pay more than $1.7 million to settle charges of running a deceptive robocall credit card scheme. The money will be used to provide refunds to defrauded consumers.

The U.S. District Court for the Middle District of Florida's ruling follows a November 2014 order granting the FTC’s motion for summary judgment against the defendants for taking part in a scheme involving the company, Treasure Your Success. UPS also did business as Newtek Merchant Solutions. 

The court held Smith and HES liable for 11 violations of the FTC Act and the FTC's Telemarketing Sales Rule, based on their role in a deceptive telemarketing scheme claiming to be a credit card interest rate reduction service. The defendants allegedly failed to disclose the identity of those responsible for placing the robocalls and unlawfully called numbers listed on the FTC’s Do Not Call Registry.

"The defendants blasted thousands of people with illegal robocalls and lied about helping relieve their credit card debt," said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. "Now they’re out of the robocall business. The court’s decision also shows that it’s bad business for payment processors to help scammers take people’s money."

The court found UPS liable for "assisting and facilitating” Telemarketing Sales Rule violations of the other defendants by providing the interface with the banks to handle credit card payments, knowing - or avoiding knowing - of the underlying violations. The court found that UPS had ignored numerous red flags that, if properly investigated, would have led it to decline Treasure Your Success as a client.  

After the summary judgment ruling, UPS agreed to a settlement permanently keepint it from processing payments for clients it knows or should have known: 1) fall into certain categories that have received close industry attention, such as debt relief services; 2) make misrepresentations to consumers; 3) charge consumers without their authorization; and 4) otherwise violate the FTC Act or the Telemarketing Sales Rule. The settlement also requires UPS to put screening and monitoring provisions in place to use when accepting future clients.

The court had entered a permanent injunction against Smith and HES in February that includes 20-year bans on robocalls, telemarketing and marketing debt relief products or services. It permanently prohibits Smith and HES from misrepresenting the sale or marketing of any product or service.

Other defendants in the scheme previously agreed to stipulated orders settling the FTC’s charges against them:

  • On September 23, 2013, a permanent injunction against defendants Willy Plancher; Valbona Toska, WV Universal Management, LLC; Global Financial Assist, LLC; and Leading Production, LLC banning them from robocalling, telemarketing, and marketing debt relief products or services;
  • On October 6, 2014, a permanent injunction against Ramon Sanchez-Ortega barring him from robocalling and telemarketing;
  • On November 19, 2014, a permanent injunction and $25,000 financial judgment against Derek Depuydt, UPS’s former president prohibiting him from acting as a payment processor, independent sales organization, or a sales agent for high-risk clients; and
  • Also on November 19, 2014, a permanent injunction against Jonathon E. Warren; Business First Solutions, Inc.; and Voiceonyx Corp. barring them from robocalling, telemarketing, and marketing debt relief products or services.

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