A company doesn’t have to be the one directly charging your credit card to play a role in an alleged billing scam. The Federal Trade Commission announced a proposed $12 million settlement with payment processor Humboldt Merchant Services after accusing the company of knowingly facilitating payment processing for fraudulent businesses. The FTC alleges Humboldt processed transactions for more than 1,000 merchants that were actually shell entities used as fronts or pass-throughs for businesses engaged in unauthorized billing schemes. If approved by a federal judge, the settlement would also permanently prevent Humboldt from processing payments for several categories of merchants considered particularly vulnerable to fraud.
FTC Says Warning Signs Were Difficult to Miss
According to the FTC’s September 8 announcement, Humboldt allegedly opened accounts and processed transactions for merchants it knew — or consciously avoided knowing — were shell companies being used by undisclosed third parties. The agency says there were significant warning signs.
The sham merchant accounts typically experienced chargeback rates nearly 10 times higher than levels credit card brands consider excessive, according to the FTC. A chargeback occurs when a cardholder disputes a transaction and the card issuer reverses it, so unusually high rates can be an important indication of dissatisfied customers, unauthorized transactions or fraud.
The FTC further alleges Humboldt attempted to increase the number of transactions that would be approved by routing the sham accounts through a lower-risk bank identification number, or BIN, belonging to an affiliated company. The allegations have not been proven in court, and Humboldt agreed to the proposed settlement without the case proceeding to trial.
One Alleged Scheme Was Already Shut Down
Among the companies whose payments Humboldt allegedly processed was Legion Media, which the FTC took action against in 2024. In that case, the FTC accused Legion Media and its operators of running business impersonation schemes and using hundreds of shell companies to open merchant accounts.
The agency alleged that scammers sometimes impersonated well-known companies and convinced consumers to pay for technical support or other services. The shell entities helped obscure who was actually receiving and processing those payments.
The FTC’s new Humboldt complaint goes a step further by targeting a company that allegedly provided the payment-processing infrastructure that allowed businesses like these to collect money. The complaint also shows how financially significant Humboldt’s higher-risk processing business allegedly became. According to the FTC’s court filing, Humboldt’s “Performance Marketing” business accounted for approximately 80% of its overall profits by 2017, when the company’s total profits had climbed above $80 million.
$12 Million Would Be Used for Consumer Refunds
Under the proposed settlement, Humboldt would pay $12 million for consumer redress. That means the money is intended to eventually compensate consumers harmed by the conduct alleged in the case. However, the FTC has not announced individual refund amounts or identified a process consumers should use to apply for payments. Consumers should therefore be cautious if anyone contacts them unexpectedly claiming they need to pay a fee or provide financial information to receive money from the Humboldt settlement.
The FTC does not require people to pay money to receive legitimate settlement refunds.
The proposed order would also prohibit Humboldt from processing payments for several categories of merchants, including straw companies, certain merchants placed on Mastercard’s MATCH high-risk list and merchants that have been subject to law-enforcement action.
Unfamiliar Charges Deserve Immediate Attention
The case provides another reason to regularly examine credit and debit card statements rather than relying exclusively on fraud alerts from a bank. An unfamiliar charge may have a company name that bears little resemblance to the business a consumer remembers dealing with, particularly when shell companies or third-party payment arrangements are involved.
If you discover an unauthorized credit card charge, acting quickly matters. The FTC’s consumer guidance on disputing charges notes that federal protections for credit card billing errors generally require consumers to dispute the error in writing within 60 days after the statement containing it was sent.
Debit card protections differ, making it particularly important to contact your bank promptly if you spot a suspicious transaction. Consumers who believe they have encountered fraud can also report it through the FTC’s ReportFraud system.
The Company Name on Your Statement Isn’t the Whole Story
What makes the Humboldt case noteworthy is that the FTC isn’t only pursuing the businesses accused of billing consumers without authorization. It’s targeting an intermediary that allegedly kept those businesses connected to the payment system despite warning signs.
The FTC’s proposed settlement was approved by a 2-0 Commission vote and filed in the U.S. District Court for the Eastern District of Michigan. It will have the force of law only after it is approved and signed by the district court judge.
For consumers, there’s a simpler takeaway: review statements carefully, question company names you don’t recognize, and don’t ignore even relatively small unauthorized charges. A charge that looks insignificant may be the first indication that a company you never knowingly did business with has access to your payment information.
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