On May 19, the FTC announced that the U.S. District Court for the District of Nevada held a payment processing company and two of its operators in civil contempt for allegedly violating a 2015 stipulated federal court order (covered by InfoBytes here). The 2015 order had resolved allegations that the defendants facilitated a deceptive scheme that caused a purported $26 million in consumer harm, and imposed requirements on the defendants’ payment processing operations.

The court held that the defendants violated four provisions of the 2015 order by: (i) processing transactions for merchants that had been placed on a credit card network’s high-risk merchant alert list; (ii) helping merchants circumvent fraud and risk monitoring programs; (iii) failing to perform screening procedures mandated by the order to determine whether transactions could be deceptive; and (iv) failing to implement screening for potential deceptive practices of high-risk clients prior to processing transactions from such clients. The court found the defendants processed hundreds of millions of dollars for merchants that had triggered the order’s prohibitions, including approximately $53 million for one merchant group involved in a criminal fraud scheme and more than $592 million for another merchant after it was placed on the high-risk alert list.

The court imposed $6.5 million in compensatory civil contempt sanctions, rejecting the FTC’s request for approximately $52.9 million (i.e., the amount of consumer loss allegedly associated with one merchant group). The court reasoned that because the defendants operated as payment processors rather than as direct sellers to consumers, the total amount of consumer loss did not appropriately measure the harm attributable to the defendants, and instead imposed a sanction based on the defendants’ gross revenues and broader business context. The court denied the FTC’s request to appoint a receiver over the company’s operations, finding that the “extreme remedy” of receivership was not warranted given less restrictive alternatives had not been explored. The court also denied the FTC’s request to modify the 2015 order to permanently ban the two individual operators from the payment processing industry, concluding that the compensatory sanctions imposed may sufficiently compel future compliance. Separately, the court denied the defendants’ own motion to modify the 2015 order, rejecting the defendants’ arguments that changes in e-commerce warranted relaxing the order’s requirements.