On May 1, 2024, the FTC filed suit against BlueSnap, an international payment facilitator, along with two of its executives, simultaneously submitting a stipulated order containing both monetary and non-monetary relief. The complaint charged that the defendants had knowingly supported a deceptive debt relief telemarketing operation known as ACRO Services, processing more than $45 million in transactions between 2016 and 2021.

In many ways, the complaint read like the archetypal FTC enforcement action. The merchant was in a disfavored industry. It experienced astonishingly high chargeback ratios, as high as 30% to 40% in some months. Negative online reviews were rampant. The defendants had received concerning messages regarding the merchant’s activity from other acquirers and at least one card brand. Rather than terminate the merchant, they opened a new merchant account in the name of a different entity and principal, using what the FTC described as a deceptively innocuous MCC to evade oversight. In short, the conduct described fell squarely within the middle of the Venn diagram of what the FTC perceives as unacceptable acquirer behavior:

And, if that were not enough, the merchant also engaged in telemarketing, implicating the Telemarketing Sales Rule (“TSR”), 16 C.F.R. Part 310, including its prohibitions against assisting and facilitating a deceptive telemarketing practice. By alleging a violation of promulgated rule, rather than merely “unfair and deceptive” conduct, the FTC was able to seek monetary relief under Section 19 of the FTC Act—a remedy that, post-AMG, is generally unavailable to the FTC under Section 13(b). In short, the complaint read much like those the FTC had filed a decade ago in cases like CardFlex and CardReady.

The stipulated order, too, followed a familiar path. The FTC obtained a $10 million monetary judgment against the defendants, secured prohibitions against supporting certain types of merchants, and implemented rigorous oversight and compliance reporting requirements that would curb defendants’ ability to work with higher-risk merchants and give the FTC insight into their risk and underwriting practices.

Among all the familiar features, however, the FTC sent new (or newer) signals regarding conduct it viewed as concerning. Among other things:

• The FTC continued to look with disfavor on the “merchant of record” model, in which an acquirer acts as a “reseller” of its vendors’ products or services. In particular, the FTC articulated its view that BlueSnap had used the merchant-of-record model “to dilute [certain vendors’] high chargeback rates with the dozens of other merchants whose payments were also processed through that account.”
• The FTC called out the application of generic MCCs (ending in 99) rather than the application of a more apt MCC that would be subject to heightened scrutiny (here, MCC 5966 for direct outbound telemarketing).
• The FTC employed a modified definition of “High-Risk Client” in the stipulated order, no longer defining the concept by reference to dollar volumes and percentages of card-not-present transactions. The FTC’s definition instead contained an updated laundry list of disfavored merchant verticals, including merchants selling “credit repair; timeshare cancellation; spyware; cryptocurrency; dating/escort services; Money Making Opportunities; Multi-Level Marketing Programs; nutraceuticals or personal enhancement products with a Negative Option Feature; essay writing/paper mills; [and] Technical Support Products or Services.”

Thus, while the story told by the BlueSnap filings is familiar, a careful and comparative review provides valuable insights into where regulatory scrutiny is shifting and how acquirers can adapt to combat merchant misconduct.