FTC Announces Settlement And Articulates Knowledge Standard For Payment-Processor Liability

The Federal Trade Commission has settled with a payment processor and four affiliated entities over allegations that the companies knowingly enabled deceptive merchants, including foreign tech-support operations, to access the U.S. card-payment system. Beyond the $4.85 million monetary judgment, the case is notable for an accompanying Joint Statement from Chairman Andrew Ferguson and Commissioner Mark Meador articulating a knowledge standard — including actual knowledge, constructive knowledge, and conscious avoidance — for unfair payment-processing claims under Section 5.

Background

Most merchants cannot accept credit or debit cards without support from payment providers that connect them to acquiring banks and card networks. Depending on the model, processors, acquirers, payment facilitators, and other intermediaries may perform or support merchant underwriting, screening against merchant-risk databases, and ongoing monitoring for chargebacks, fraud, and other warning signs.