FTC Takes Action Against Payment Processor Humboldt Merchant Services for Knowingly Facilitating Payment Processing for Sham Merchants

Payment processing company Humboldt Merchant Services will pay $12 million and be permanently banned from processing payments for merchants with a heightened risk of potential fraud to settle allegations that Humboldt processed payments for merchants that defrauded consumers.According to the FTC’s complaint, Humboldt processed payments for more than 1,000 merchants that were shell entities that served as fronts or pass-throughs for fraudulent companies engaged in unauthorized billing scams, including Legion Media, which the FTC shut down in 2024. “Humboldt was processing payments for companies despite red flags indicating they were scamming consumers,” said Katherine White, Deputy Director of the FTC’s Bureau of Consumer Protection. “This case underscores the FTC’s commitment to holding companies accountable for knowingly supporting fraudulent businesses.”The FTC’s complaint alleges that Humboldt:Opened and processed payments for merchants it knew, or consciously avoided knowing, were shell companies used by undisclosed third parties engaged in fraud;Opened these sham accounts despite red flags indicating the merchants were shells and typically incurred chargeback...