WA, FTC reach $600K settlement with payment processing company for deceptive practices
Washington small business owners will receive financial relief through a $600,000 settlement with the payment processor Riverside Payments, Inc., its affiliate, and the companies’ owners, resolving allegations the firms deceived customers with false promises of cost savings and extreme hurdles to canceling when they wanted out.
Small businesses will be able to cancel their processing contracts without a termination penalty under the proposed order settling the allegations from the Federal Trade Commission (FTC) and the state of Washington. They will also be eligible for compensation based on each business’s processing volume over the past six months. More than 300 small businesses in Washington will be eligible.
Riverside, based in Vancouver, Wash., sells credit card payment processing services to merchants across the country. In their complaint, the FTC and Washington allege Riverside, its affiliate Cascade Equipment Leasing, and their owners falsely promised small businesses that they would save money on payment processing services, while failing to clearly inform the businesses that they were being enrolled in automatically renewing contracts for such services and to lease equipment. Then the companies left frustrated customers in a “complicated loop of deflection and fruitless phone calls” when they tried to cancel, according to the complaint.
“Riverside and Cascade failed to serve their small business customers in an honest, transparent way in violation of Washington law,” Attorney General Nick Brown said. “I’m gratified that we can now deliver relief to impacted Washington businesses and get accountability for these deceptive practices.”
The FTC and Washington allege Riverside claimed small businesses could in some cases save nearly 60% by switching payment processing services to Riverside. But small businesses that switched to Riverside typically ended up paying more than they did with their previous provider, the complaint alleges.
Riverside also failed to disclose various added fees and buried key information including a $695 early termination fee and the cost of leasing payment processing machines from Cascade.
The FTC and Washington allege Riverside made it extremely difficult for small businesses to cancel services despite its promised “no-risk” guarantee when customers signed up.
Riverside also allegedly made false and unsubstantiated claims about how much money its sales agents, who work on commission, will earn. Riverside’s ads claimed sales agents could earn between $75,000 and $95,000 a year and that top sales agents can make “100k.” Agents on average made about $3,800 per year, according to the complaint.
The FTC alleged Riverside’s practices violated the FTC Act and the Gramm-Leach-Bliley Act by obtaining consumers’ financial information through false or fraudulent statements. Washington alleged defendants violated the Washington State Consumer Protection Act.
The proposed order imposes a $32 million judgment against Riverside, Cascade, and the company owners, which will be suspended after payment of $600,000 due to their inability to pay the full amount. The full amount will be due if they are found to have misrepresented their finances.
The order also requires the defendants to notify customers that Riverside will, for a 60-day period, waive the early termination fee or any penalty for rescinding the merchant processing agreements. The defendants also will be prohibited from: misrepresenting the costs, savings, cancellation conditions, or any other material fact about any good or service they sell; making unsubstantiated claims about cost savings for customers; making unsubstantiated earnings claims; and misrepresenting any aspect of a negative option feature related to a good or service they sell.
A negative option feature is when a seller interprets a consumer’s lack of action as consent to pay a fee or enroll in a recurring payment.
The order also requires defendants to clearly and conspicuously disclose to consumers, prior to obtaining their billing information, all material terms of the transaction; to obtain consumers’ express informed consent to use a negative option plan to bill consumers; and to provide consumers with a simple way to cancel a negative option plan.
The FTC and Washington filed the complaint and final order in the U.S. District Court for the Western District of Washington.
Assistant Attorneys General Michael Bradley and Juju Aldhaher, Investigator Dan Cencak, and Paralegals Zaynah Keopraseurt, Hannah Jenssen, and Grace Monastrial handled the case for Washington.
-30-
Washington’s Attorney General serves the people and the state of Washington. As the state’s largest law firm, the Attorney General’s Office provides legal representation to every state agency, board, and commission in Washington. Additionally, the Office serves the people directly by enforcing consumer protection, civil rights, and environmental protection laws. The Office also prosecutes elder abuse, Medicaid fraud, and handles sexually violent predator cases in 38 of Washington’s 39 counties. Visit www.atg.wa.gov to learn more.
Media Contact:
Email: press@atg.wa.gov
Phone: (360) 753-2727
General contacts: Click here
Legal Disclaimer:
EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.
