By Nathalie Voit
Payment processing company First American Payment Systems is the subject of a federal lawsuit initiated by the U.S. government, according to a press release posted by the Federal Trade Commission (FTC) on July 29.
The complaint, filed by the FTC on Friday, claimed that First American and two of its sales affiliates, Eliot Management Group and Think Point Financial, scammed small businesses with junk charges, hidden terms, and surprise exit fees.
The FTC claimed that the defendants made purposefully misleading statements about fees and cost savings to lure unsuspecting merchants into using their services, many of whom were non-native English speakers. Once the merchants were enrolled, First American allegedly unlawfully debited their accounts and made it exceedingly onerous for them to terminate the service.
For example, the complaint states that First American charged a surprise $495.00 early cancellation fee when customers tried to cut ties with the service. However, the company’s sales reps had promised small businesses they were free to exit the agreement at any time without a fee when they signed the contract. In reality, First American’s online enrollment system for new customers obscured a three-year obligation, cancellation obligations and fees, the fact that agreements would automatically renew, and other critical information from small business owners.
The Texas-based payment processor was also accused of hiding under different business names to avoid detection when merchants notified their bank to stop payments to First American.
Under a proposed federal court order, First American and its affiliates must refund $4.9 million to affected customers. The defendants must also end their illegal sales pitches and practices and make it easier for businesses to cancel their services. Additionally, the defendants must stop charging existing customers early termination fees and end unauthorized bank withdrawals.
“First American lured small businesses in with false promises of low costs and an easy exit and hit them with surprise fees and illegal charges when they tried to get out,” Director of the FTC’s Bureau of Consumer Protection Samuel Levine said in the news release. “Today’s order returns millions to merchants, bans unauthorized billings, and makes it easier for customers to cancel.”
