The Federal Trade Commission (FTC) has taken action against Paddle, a payment processing company, for allegedly enabling deceptive foreign operators to exploit the U.S. credit card system. This practice has reportedly cost consumers millions of dollars, particularly targeting older adults through misleading tech-support schemes.
In a complaint filed by the FTC, Paddle and its subsidiary were accused of processing payments for various fraudulent tech-support services. These services often used fake alerts and pop-up messages to impersonate well-known brands like Microsoft and McAfee. The FTC highlighted that Paddle acted as a "merchant of record," allowing it to process payments on behalf of multiple unrelated merchants, which helped these overseas schemes evade detection by banks and credit card networks.
In March 2024, one of Paddle’s clients, Restoro-Reimage, settled with the FTC for $26 million after being charged with violating the FTC Act and the Telemarketing Sales Rule. Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, emphasized that the agency will hold accountable payment companies that knowingly facilitate scams or ignore warning signs about their clients.
The FTC’s complaint outlines several serious allegations against Paddle. It claims that the company opened merchant accounts under false pretenses and charged consumers for automatic subscription renewals without proper disclosure. This lack of transparency meant that many consumers were unaware that they would face recurring charges.
As part of the FTC’s order, Paddle is now permanently barred from processing payments for tech-support merchants that engage in telemarketing or use deceptive pop-up messages. The company must also improve its client screening and monitoring processes and provide regular reports on its merchant-clients’ transactions. Additionally, Paddle is required to clearly disclose subscription terms, obtain explicit consent from consumers, and offer a straightforward way for them to cancel subscriptions and avoid ongoing charges.
This case serves as a reminder of the importance of consumer protection in the digital age, particularly as scams become increasingly sophisticated. The FTC’s actions signal a commitment to safeguarding consumers from deceptive practices in the tech-support industry.