The Federal Trade Commission has filed a contempt motion in federal court seeking $52.9 million in penalties and permanent industry bans against payment processor Cliq, Inc. and its top executives for allegedly violating a 2015 order designed to prevent fraud in the credit card processing system.
The motion targets Cliq, Inc., formerly known as Cardflex, Inc., along with CEO Andrew Phillips and Chief Technology and Security Officer John Blaugrund. The FTC alleges the company systematically flouted obligations under a 2015 order that required reasonable steps to prevent and detect fraud in payment processing operations.
"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 U.S. payment system."
The 2015 order stemmed from previous allegations that the company illegally processed credit card payments. Under that order, Cliq was required to implement safeguards to prevent processing payments for fraudulent or high-risk merchants. However, the FTC now alleges the company has systematically violated multiple provisions of that agreement.
According to the FTC's filing, Cliq processed hundreds of millions of dollars in payments for at least three clients who appeared on Mastercard's Member Alert To Control High (MATCH) list. This list includes merchants who have been terminated for violating card brand rules, often due to excessive chargeback rates. Chargebacks occur when consumers dispute credit card transactions because products or services received do not match what was promised.
The violations extend beyond processing prohibited transactions. The FTC alleges that Cliq actively assisted clients in evading bank and credit card network fraud monitoring programs. This assistance allegedly helped high-risk merchants avoid detection by systems designed to identify and prevent fraudulent activity.
Further violations include the company's failure to properly screen high-risk clients. The FTC claims Cliq processed transactions for these clients without conducting reasonable efforts to evaluate their business practices or determine whether they were likely to engage in deceptive practices.
The agency also alleges that Cliq failed to adequately monitor the sales and transactional activity of high-risk clients to identify potentially deceptive business practices. When clients did experience high chargeback rates, the company allegedly ceased processing without properly investigating whether those clients were engaged in deception.
Among the most serious allegations is that some of the merchants Cliq processed payments for have been separately indicted for crimes related to their payment processing activities. This suggests the violations may have enabled criminal enterprise rather than simply regulatory non-compliance.
The FTC's contempt motion seeks multiple forms of relief. In addition to the $52.9 million in compensatory relief for consumers, the agency wants the court to modify the 2015 order to permanently ban Phillips and Blaugrund from the payment processing business. The FTC also requests the appointment of a receiver to ensure future compliance with the order's requirements.
Payment processing fraud has become a significant concern for regulators as it can facilitate a wide range of consumer scams and fraudulent business practices. When payment processors fail to implement adequate safeguards, they can enable merchants to continue operating fraudulent schemes even after being terminated by legitimate processors.
The case highlights the FTC's ongoing efforts to enforce compliance with consent orders and other regulatory agreements. When companies violate these orders, the agency can seek contempt proceedings that may result in substantial financial penalties and operational restrictions.
For consumers, payment processing fraud can result in unauthorized charges, difficulty obtaining refunds for fraudulent purchases, and compromised financial information. The FTC's enforcement actions aim to protect consumers by ensuring payment processors maintain adequate fraud prevention measures.
The contempt motion represents an escalation in enforcement against Cliq and its executives. If successful, the permanent industry bans would prevent Phillips and Blaugrund from operating in the payment processing sector, while the financial penalties would provide relief to affected consumers.
The case will now proceed in federal court, where a judge will determine whether Cliq and its operators should be held in contempt for violating the 2015 order. The outcome could set important precedents for how seriously courts view violations of FTC consent orders in the payment processing industry.
This enforcement action underscores the FTC's commitment to holding payment processors accountable for maintaining the integrity of the financial system and protecting consumers from fraudulent schemes enabled by inadequate oversight.