FTC Settlement Bans Paddle From Processing Payments For Tech-Support Telemarketers

Paddle will also be permanently banned from processing payments for tech-support telemarketers, the FTC said in a Monday press release.

“Paddle provided foreign-based tech-support schemes with access to the U.S. payment system, allowing these companies to harm consumers,” Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said in the release. “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.”

Reached by PYMNTS, Paddle said in an emailed statement that the FTC’s charges involve two companies out of the more than 6,000 served by Paddle; that the company onboarded them more than five years ago; that it finds their alleged behavior “abhorrent”; and that the settlement acknowledges many of Paddle’s existing risk processes and governance.

“We believe the agreement with the FTC will memorialize our strong risk governance, setting the bar for both ourselves and for the wider industry,” Paddle President Rob Fletcher said in the release. “We are grateful for the positive engagement we have had with the FTC, and we are committed to not only meeting but exceeding this high bar, for the benefit of all.”

The FTC’s complaint alleges that the company processed card payments on behalf of unrelated, third-party merchants after claiming to be a “merchant of record” or “software reseller”; enabled overseas schemes to access the credit card system and collect payments from U.S. consumers; enabled them to evade detection by merchant banks and card networks; and charged consumers for automatically renewing subscriptions without clear disclosures, according to the release.

The complaint alleges Paddle violated the FTC Act, the Telemarketing Sales Rule and the Restore Online Shoppers’ Confidence Act, per the release.

In a statement issued by FTC Chairman Andrew N. Ferguson and joined by Commissioners Melissa Holyoak and Mark R. Meador, Ferguson said that focusing on payment systems rather than individual foreign scams enables the FTC to combat these scams without draining its resources.

“But by vigorously enforcing our laws in our payment systems, the Commission ensures that private industry takes the steps the law requires to protect Americans from foreigners who would use the payment system to prey on them,” Ferguson said.

In an earlier, separate case, the FTC said in February 2024 that it was sending more than $610,000 in refunds to consumers who lost money in a tech support scam facilitated by payment processor Nexway.

The agency had announced its settlement with Nexway in April 2023.

The FTC reported in February 2024 that imposter scams — which include tech support scams — accounted for the second-greatest share of fraud losses in 2023, behind only investment scams.