The FTC alleged that Paddle abused the U.S. credit-card system and enabled deceptive foreign operators to access it, costing consumers millions of dollars.
In a complaint, the FTC alleged that Paddle and its subsidiary processed payments for deceptive tech-support schemes that targeted U.S. consumers including older adults. In March 2024, Paddle’s client, Restoro-Reimage, paid $26 million to settle the FTC’s charges of violating the FTC Act and the Telemarketing Sales Rule.
“Paddle provided foreign-based tech-support schemes with access to the U.S. payment system, allowing these companies to harm consumers,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection. “The FTC will hold accountable payment companies that knowingly facilitate payments for scammers or look the other way when faced with red flags about their clients’ conduct.”
The complaint charges that:
- Paddle opened merchant accounts claiming to be a “merchant of record” or software “reseller,” then used these accounts to process card payments on behalf of numerous, unrelated third-party merchants.
- Paddle enabled overseas schemes to access the credit card system and collect payments from U.S. consumers, and to evade detection by merchant banks and card networks.
- Paddle facilitated schemes, like Restoro-Reimage, that allegedly used fake virus alerts and pop-up messages to impersonate familiar brands, such as Microsoft or McAfee.
- As the “merchant of record,” Paddle charged consumers for automatically renewing subscriptions without clearly disclosing that consumers would incur recurring charges.
The FTC alleged Paddle violated the FTC Act, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act.
Under the FTC order, Paddle is permanently prohibited from from processing payments for tech-support merchants that engage in telemarketing or use pop-up messages about computer security or performance, and it is prohibited from assisting deceptive merchants or engaging in any tactic to avoid fraud or risk-monitoring programs established by banks or the card networks.
- Required to implement effective client screening and monitoring, and provide periodic reporting about merchant-clients’ transactions to Paddle’s payment-service providers; and
- Required to clearly and conspicuously disclose the terms of any subscription it processes, get consumers’ express informed consent to the subscription, and provide consumers with a simple way to cancel and prevent recurring charges.
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