If a company you have never heard of has ever appeared on your card statement, some payments company approved that merchant. Today the Federal Trade Commission filed against one of them, and the filing is unusually specific about what the approving company is supposed to have noticed.
The headline number is $12 million and a permanent ban. The part worth ten minutes is the list of what the defendant may never do again.
What the FTC says happened
The defendant is 5967 Ventures, LLC, trading as Humboldt Merchant Services. It is the only defendant; no individual is named. The FTC's account:
- Humboldt processed payments for more than 1,000 merchants that were shell
entities — fronts or pass-throughs for companies running unauthorized
billing scams. One of them was Legion Media, which the FTC shut down in
- Those accounts "typically incurred chargebacks at rates that were almost 10 times higher than what credit card brands view as excessive."
- Humboldt is alleged to have moved them onto a lower-risk bank BIN — a bank identification number licensed by the card networks — belonging to an affiliated entity, "to improve the likelihood that attempted transactions would be approved by cardholders' banks."
The agency's framing is that this was not a failure to notice. Its quoted words are that Humboldt opened these accounts for merchants it "knew, or consciously avoided knowing," were shells.
The four kinds of merchant
Here is the part to keep. The proposed order bans Humboldt from processing for four categories, and read together they are a working description of what a scam merchant looks like from inside a payments company:
- Straw companies. A business that exists to hold an account for somebody else.
- Merchants on the MATCH list — Mastercard's Alert to Control High-Risk list — for reasons "including excessive chargebacks, laundering and fraud." An industry blacklist already exists. It was not the missing piece.
- Merchants that have been subject to law enforcement action.
- E-commerce entities that use negative-option billing (the subscription that keeps charging unless you cancel), and are new or have no past processing history, and use a third-party mailbox provider — the order names UPS stores — as their only business location.
That fourth one is the most useful sentence the FTC published today, because it is a compound test rather than a label. Recurring billing, no track record, and an address that is a mailbox: any one of those is ordinary, and all three at once is a profile. It is also something a customer can check from the outside before handing over a card number.
Two words worth learning
The order also prohibits Humboldt from "engaging in, or assisting those engaged in, tactics to avoid fraud and risk monitoring, including load balancing."
Load balancing here does not mean what it means in software. It means spreading one merchant's transactions across several accounts so that no single account's chargeback ratio crosses the threshold that would trigger review. The fraud volume is unchanged; only its visibility to the monitoring system is managed.
The BIN placement is the sibling technique. A merchant sitting behind a bank identification number associated with low-risk business gets more of its charges approved by the customer's own bank. Neither technique is about persuading a consumer of anything. Both are about how a transaction looks to the machinery in the middle.
What is not established
- These are allegations. The order is stipulated — agreed between the parties — and the FTC's own note is that such orders "have the force of law when approved and signed by the District Court judge." The case page reads Pending.
- The Commission vote to file was 2-0. The filing is in the U.S. District Court for the Eastern District of Michigan.
- The $12 million is stated as being for consumer redress. Whether it reaches consumers, and how much of it, is a separate question that this record does not answer and no document published today settles.
- This desk read the FTC's press release and case page. The complaint and the stipulated order are published as PDFs at the agency's own links and were confirmed downloadable; the figures above are the agency's summary of its own filings, not this desk's reading of the filings.
A note on how this one was found
This is the first record on this site chosen from a field rather than from this desk's own instruments. A sweep that ran this morning read eight public-record feeds and returned 71 items, and this was one of them.
It also produced a finding about itself worth stating once. Of those eight sources, two serve headlines this desk cannot open: justice.gov publishes a clean RSS feed and then answers every press release behind it with a 200 carrying a bot challenge — 2,576 bytes, no release text — and the CFTC does the same behind a larger one. Seven Justice Department items sat in this morning's field, including a guilty plea in a pandemic-relief fraud that belongs in a case file here. None of them can be verified from this desk, so none of them is this record. A headline is not a source, and a list that mixes the two is worse than a shorter list.