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UK payments company Paddle will pay a sum of $5m to settle allegations by the US Federal Trade Commission (FTC) that it facilitated deceptive tech-support schemes targeting US consumers, including older adults.
Under a proposed settlement, Paddle and its US subsidiary will also be permanently banned from processing payments for tech-support telemarketers.
The FTC accused Paddle of abusing the US credit-card system by helping foreign-based scammers collect millions of dollars from consumers.
“America is suffering under a serious scam problem. Millions of Americans are the victims of scams every year, and the perpetrators of those scams steal tens of billions of dollars out of Americans’ pockets,” commented FTC chair Andrew N. Ferguson and commissioners Melissa Holyoak and Mark R. Meador.
“Many of these scams are inflicted on Americans by their fellow citizens. But a huge proportion of scams targeting Americans are now coming from outside of the United States. Today’s case involves such foreign scammers. Each of the companies that the Commission by name alleges Paddle's services to scam Americans were operating abroad.”
The FTC’s complaint alleged that Paddle opened merchant accounts under the guise of being a “merchant of record” or software “reseller,” then used these accounts to process payments for unrelated third-party operators, including schemes such as Restoro-Reimage.
These operators allegedly used fake virus alerts and pop-ups impersonating well-known brands such as Microsoft and McAfee to trick consumers into paying for unnecessary tech support or software.
The FTC further alleged that Paddle charged consumers for automatically renewing subscriptions without adequately disclosing the recurring nature of those charges, breaching several US consumer protection laws, including the FTC Act, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act.
Paddle’s client Restoro-Reimage separately agreed to pay $26m in March 2024 to resolve FTC charges.
A fierce critique
In response to the settlement, Paddle have condemned the actions of the companies that it onboarded. "We find their alleged behaviour and its impact on consumers abhorrent."
The spokesperson continued: "We do not wish to profit from our association with these two companies, and so the settlement includes an amount of $5m to reflect that."
The company CEO Jimmy Fitzgerald meanwhile acknowledged that "it is sadly a reality that there are some bad faith actors out there.”
While Rob Fletcher, company president, said that the settlement will "memorialize our strong risk governance, setting the bar for both ourselves and for the wider industry".
The intervention from the FTC leadership does not hold back in its critique of Paddle.
“Using its American presence, Paddle, the Complaint alleges, served as foreign scammers’ payment processor, allowing them to draw from American consumers’ debit and credit cards without crucial safeguards,” the statement says.
According to the statement, Paddle recognised “that it could re-sell its indirect access to merchants that the card networks and banks would neither allow direct access nor allow the payment facilitators they have relationships with to give indirect access”.
“Those merchants showed high chargeback rates and a propensity to harm American consumers, but, the Complaint alleges, Paddle shrouded them to prevent card networks and banks from identifying and stopping them from exploiting the payment system.”
As part of the proposed settlement, Paddle must permanently stop processing payments for tech-support telemarketers or merchants using deceptive pop-ups about computer security, implement rigorous client screening and transaction monitoring.
In addition, it must transparently disclose subscription terms and obtain informed consent before charging consumers, and provide a simple way for consumers to cancel subscriptions and prevent recurring charges.
