A company that sold credit and debit card payment processing services to small businesses has agreed to settle Federal Trade Commission charges that it used deception and unsubstantiated claims when signing up businesses for its services and processing equipment.
The defendants behind Merchant Services Direct LLC (MSD) will pay $175,000 and be prohibited from continuing to use the allegedly deceptive sales tactics. Along with MSD, the settling defendants include: Boost Commerce Inc., Kyle Lawson Dove and Shane Patrick Hurley. Charges against another defendant, Generation Y Investments LLC, were voluntarily dismissed as part of the settlement.
The defendants also agreed to settle similar charges the Washington Attorney Generals office filed in state court.
According to the FTC's complaint, MSD was an "independent sales organization" that sold small businesses the ability to accept credit and debit card payments. The businesses paid fees whenever their customers paid with a credit or debit card.
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MSD agents allegedly:
tricked merchants into signing binding contracts by telling them the documents were just applications to obtain price quotes;
led merchants to believe they were associated with the merchants current card processor, Visa or MasterCard, or their bank and tricked them into signing new contracts by telling them they were just updating existing account paperwork;
duped merchants into leasing new card processing terminals for two to four years, falsely claiming their current swipe terminals were outdated or incompatible with its services; and
falsely told merchants they could cancel at any time.
As part of the settlement, the defendants must provide to merchants: (1) a separate document disclosing all fees, charges and rates before merchants sign any contracts with the defendants, and; (2) a complete copy of any documents merchants sign before submitting the merchants' applications for payment processing services.
