FTC Takes Action Against Payment Processor Humboldt Merchant Services for Knowingly Facilitating Payment Processing for Sham Merchants
Humboldt Merchant Services agreed to a $12 million fine and a permanent ban from processing payments for high-risk merchants after the FTC alleged it facilitated fraudulent transactions for over 1,000 sham entities.
Humboldt Merchant Services, a payment processing company, has agreed to pay a $12 million penalty and be permanently barred from processing payments for high-risk merchants under a settlement with the Federal Trade Commission. The FTC alleged that Humboldt knowingly processed transactions for more than 1,000 shell entities acting as fronts for fraudulent companies engaged in unauthorized billing scams. The complaint specifically cited Legion Media, a fraudulent operation shut down by the FTC in 2024, as one of the merchants Humboldt processed payments for despite clear warning signs.
The FTC’s complaint accused Humboldt of ignoring red flags indicating consumer fraud, including unauthorized billing schemes, while continuing to process payments on behalf of these merchants. Katherine White, Deputy Director of the FTC’s Bureau of Consumer Protection, stated that the case demonstrates the agency’s commitment to holding companies accountable for enabling fraudulent businesses. The FTC’s investigation revealed that Humboldt’s actions facilitated significant consumer harm through these unauthorized transactions.
Under the proposed settlement, Humboldt is prohibited from processing payments for merchants with a heightened risk of fraud, effectively barring the company from future high-risk payment processing. The settlement must still be approved by a U.S. District Court judge in the Eastern District of Michigan before taking legal effect. The FTC emphasized that stipulated final orders carry the force of law once signed by the court.
The FTC’s action underscores broader efforts to combat payment processing companies that enable fraudulent activities. Consumers affected by unauthorized billing scams are encouraged to report such incidents to the FTC via ReportFraud.ftc.gov. The FTC also provides resources for consumers and businesses to recognize and avoid fraudulent schemes through its consumer education portal.