"Rachel From Cardholder Services" and the Payment Processor That Paid for Everything

One of the cases that came out of that fight, Treasure Your Success, has a twist I love talking about. The company that ended up paying for the entire consumer loss wasn't the robocaller. It was the payment processor.

So what happened?

In November 2012, the FTC sued the people behind Treasure Your Success (TYS) in federal court in the Middle District of Florida, Orlando Division. The court halted the operation and froze assets.

According to the FTC, TYS:

• Made deceptive "cardholder services" robocalls promising to lower credit card rates, in many cases down to as low as three percent.
• Charged upfront fees as high as $1,593.93.
• Didn't deliver. Consumers typically got no rate reduction and no savings.
• Called numbers on the Do Not Call Registry and didn't identify who was placing the calls.

Here's the twist

In June 2013, the FTC amended its complaint and added eight new defendants. One was Universal Processing Services of Wisconsin, LLC (UPS), doing business as Newtek Merchant Solutions, plus its former president.

According to the FTC, they approved TYS for a merchant account without customary reviews, like getting telemarketing scripts as their own procedures required, despite clear warning signs. And they kept processing even though TYS had high chargeback rates, fraud alerts on its credit reports and was in MasterCard's fraud monitoring program.

Read the FTC's amended complaint in the Treasure Your Success case.

How did it end?

• September 2013: The TYS operators were banned from robocalling, telemarketing and marketing debt relief, with a $2,032,626 judgment suspended for inability to pay.
• November 2014: The court granted summary judgment against UPS, telemarketer Hal E. Smith and his company.
• May 2015: The court ordered those defendants to pay $1,734,972. It found UPS liable for "assisting and facilitating" the Telemarketing Sales Rule (TSR) violations, holding that it knew, or avoided knowing, what was going on. UPS also agreed to stop processing certain high-risk categories and to implement screening and monitoring procedures for new accounts.

"The court's decision also shows that it's bad business for payment processors to help scammers take people's money," said Jessica Rich, then Director of the FTC's Bureau of Consumer Protection.

UPS appealed. The FTC won at the Eleventh Circuit, and the Supreme Court denied review in June 2018. In February 2019, the FTC mailed 1,244 checks. Full refunds, most $1,100 or more.

Why should you care?

Because "I just process the payments" or "I just provide the service" isn't a shield.

The TSR makes it illegal to give substantial assistance to a seller or telemarketer when you know, or consciously avoid knowing, that they're breaking the rule. That's how a processor ended up on the hook for the whole loss.

If you're a vendor in the call space:

• Actually follow your own onboarding procedures. Ask for scripts.
• Treat chargebacks and fraud alerts like a fire alarm.
• Don't look away. "Avoided knowing" counts.