FTC Sues Payment Processor That Took Millions From Consumers’ Bank Accounts Without Their Knowledge

On January 8th, a payment processor violated federal law when it debited, or tried to debit, more than $9.9 million from consumers’ bank accounts – at $139 each – without their approval. According to a complaint the FTC filed in federal court, Nevada-based InterBill Ltd. acted on behalf of a fraudulent enterprise known as “Pharmacycards.com.” In 2004 the FTC charged Pharmacycards with debiting millions of dollars from consumers’ checking accounts, without their consent, for nonexistent discount pharmacy cards.
InterBill’s business is processing payments for merchants, including those its industry considers “high risk,” such as online gaming and mail and telephone marketing. Using consumers’ names and bank account information provided by Pharmacycards, InterBill debited thousands of consumers’ accounts despite indications that the operation was bogus. Consumers had no contact with InterBill or Pharmacycards before money was taken from their checking accounts.

According to the complaint, InterBill did not follow its own guidelines for new merchants before doing work for Pharmacycards, including collecting information, checking references, and verifying a physical address. Pharmacycards provided a London, England, mail drop as a business address and conducted all of its business by pre-paid, virtually untraceable cellular phones and free, anonymous e-mail and facsimile accounts. The Pharmacycards Web site provided a toll- free customer service number that was answered at a call center in Montreal, Quebec, Canada and a fake address in British Columbia, Canada. Pharmacycards operators used the identity of a Cyprus corporation and directed that their funds be wired to a Cyprus bank account.

The complaint alleges that InterBill anticipated high rates of returned or reversed transactions, a sign that unauthorized debits from consumers’ accounts were likely. InterBill did not request or obtain proof that consumers had authorized Pharmacycards to debit their accounts and, shortly after starting its work, InterBill received strong indications that the transactions were unauthorized – rates of returned transactions skyrocketed, and InterBill received complaints from consumers and banks.

InterBill ultimately asked Pharmacycards about the source of its consumer database and
requested proof that consumers had received the material for which they were billed, but despite receiving insufficient answers, InterBill kept processing payments. According to the complaint, more than 70 percent of the attempted transactions were returned or refused by the consumers’ banks, and more than $2.38 million was debited from consumers’ accounts.

The FTC charges InterBill and its principal officer, Thomas Wells, with violating Section 5 of the FTC Act by unfairly processing debt transactions to consumer’s bank accounts. The FTC seeks consumer redress and a permanent bar on further violations. The Commission vote to authorize staff to file the complaint was 5-0.

Authored by

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com