US regulators have returned to court against payment processor Cliq, alleging the company and two senior executives breached a 2015 settlement.
The Federal Trade Commission (FTC) filed a motion on January 13 asking a federal judge in Nevada to impose financial penalties of at least $52.9m on Cliq, formerly known as Cardflex.
The FTC has also asked for two Cliq executives be restricted from operating in payments while an independent overseer is appointed to supervise the company’s compliance controls.
Cliq previously settled with the agency in 2015 following accusations it had enabled deceptive merchants by continuing to process payments despite warning signs such as excessive chargebacks and consumer complaints.
In its latest filing, the FTC says the company failed to honour the prior agreement and has continued to onboard and service merchants which had been terminated by banks or flagged by card networks, as well as provided processing support to businesses later accused of criminal conduct.
“Cliq and its operators flagrantly violated an FTC order requiring reasonable steps to prevent and detect fraud,” said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection.
“We will not hesitate to hold accountable companies that ignore red flags and distort the honest functioning of the US payment system.”
In a statement sent to Payment Expert, Cliq said: “Cliq is confident in its business and compliance practices and adheres to the law. The company will vigorously defend against this unjustified action.”
The original settlement
Cliq’s latest legal trouble traces back to a 2015 FTC enforcement action over allegations it enabled consumer fraud by continuing to process payments for deceptive merchants.
At the time, the FTC said CardFlex had helped scammers “drain people’s credit and debit accounts without their permission”, with then Bureau of Consumer Protection Director Jessica Rich warning the case showed “facilitating fraud is a bad strategy for payment processors”.
The settlement barred CardFlex, CEO Andrew Phillips and Chief Technology and Security Officer John Blaugrund from processing payments for certain categories of merchants and from helping clients evade card network risk-monitoring programmes.
The order also required the company to strengthen merchant screening, monitor transactional activity for signs of deception and terminate accounts where misconduct was detected.
Regulators had alleged CardFlex processed more than $26m in unauthorised charges for a marketing operation known as I Works, which the FTC accused of scamming consumers through deceptive subscription offers and trial memberships.
According to the FTC’s latest court filing, those compliance obligations were later ignored or circumvented. The agency now claims Cliq processed hundreds of millions of dollars in transactions for merchants listed on Mastercard’s MATCH database, failed to adequately vet new clients and assisted some customers in bypassing bank and card network fraud controls.
Several of the merchants processed by Cliq were later indicted on criminal charges linked to consumer scams, according to the regulator.
Credit cards back in the firing line
It is only January, yet credit cards have already been the subject of several international headlines. The FTC’s lawsuit follows President Donald Trump’s public backing of legislative efforts to change how the industry operates.
In a post on TruthSocial on January 13, Trump called for support for the Credit Card Competition Act, following comments earlier this month pushing for a one-year cap on credit card interest rates at 10%.
Republican Senator Roger Marshall and Democratic Senator Dick Durbin answered the call shortly after and published plans to reintroduce the bill, which seeks to increase competition in the card network market and reduce merchant costs by challenging the dominance of Visa and Mastercard.
Marshall said American families were being “ripped off by big banks” through swipe fees and argued the legislation would bring “real competition” to a market he said was dominated by the two largest networks.
Durbin highlighted the impact of interchange costs on everyday purchases such as groceries and fuel and argued the bill could help lower prices for merchants and consumers alike.
