WASHINGTON, D.C. — Payment processor Humboldt Merchant Services will pay $12 million for consumer redress and face permanent restrictions on handling transactions for high-risk merchants under a proposed Federal Trade Commission settlement over allegations that it facilitated payment processing for businesses engaged in consumer fraud.
The FTC alleged Humboldt processed payments for more than 1,000 merchants that were shell companies serving as fronts or pass-through entities for businesses engaged in unauthorized billing schemes, including Legion Media, which the agency shut down in 2024.
“Humboldt was processing payments for companies despite red flags indicating they were scamming consumers,” Katherine White, deputy director of the FTC’s Bureau of Consumer Protection, stated. “This case underscores the FTC’s commitment to holding companies accountable for knowingly supporting fraudulent businesses.”
According to the complaint, Humboldt opened merchant accounts and processed transactions despite knowing, or consciously avoiding knowing, that some accounts were shell companies used by undisclosed third parties engaged in fraud.
Those accounts frequently generated chargeback rates nearly 10 times higher than levels credit-card networks consider excessive, the FTC alleged.
The agency also accused Humboldt of attempting to increase transaction approvals by moving sham merchant accounts onto a lower-risk bank identification number, or BIN, used by an affiliated entity. BINs are licensed by card networks and identify the financial institution involved in processing a transaction.
Under the proposed order, Humboldt would be permanently prohibited from engaging in or assisting with credit-card laundering.
The company also would be barred from processing payments for four categories of merchants: straw companies; businesses placed on Mastercard’s Alert to Control High-Risk, or MATCH, list for reasons including excessive chargebacks, laundering or fraud; merchants subject to law-enforcement actions; and certain e-commerce businesses using third-party mailbox providers as their only business address.
The restriction on mailbox-based e-commerce companies applies when those businesses use negative-option billing, are newly established or lack previous payment-processing history.
Humboldt would also be prohibited from making or helping others provide false or misleading information to secure payment processing, including inaccurate information in merchant-account applications.
The proposed order further bars Humboldt from participating in tactics designed to evade fraud and risk-monitoring systems, including load balancing.
The FTC Commission voted 2-0 to approve filing the proposed order in the U.S. District Court for the Eastern District of Michigan.
The restrictions and other terms will carry the force of law if the federal judge approves and signs the stipulated final order.
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