Ignoring Allegations of Unlawful Behavior Leads a Payment Processor to a $40 Million Settlement

  • The FTC reached settlements with payment processor First Data Merchant Services, LLC (“First Data”) and Chi “Vincent” Ko, who owned a company that was First Data’s independent sales agent, and who later became a First Data executive, to resolve allegations of knowingly processing credit card transactions for scams that targeted hundreds of thousands of consumers in violation of the FTC Act and the Telemarketing Sales Rule.
  • The FTC’s complaint alleged that First Data ignored repeated warnings from employees and banks that Ko was laundering payments for companies engaging in unlawful conduct, and that First Data was assisting in his laundering activity.
  • Under the terms of the proposed settlement with First Data, among other things, First Data will pay $40 million to be used for refunds to affected consumers. In addition, First Data will be required to institute screening and monitoring programs for high-risk merchant-clients, establish an oversight program to monitor its independent sales agents, and retain an independent assessor to supervise First Data’s compliance with the settlement oversight program. Under the terms of the proposed settlement with Ko, among other things, he is required to pay over $270,000 to be used for consumer refunds, and he is barred from payment processing for high-risk merchants.