by Ben Dwyer It seems like there’s been a flurry of lawsuits and investigations in the payments industry lately, with Northern Leasing sued for racketeering, Mercury Payment Systems defending against a second lawsuit for deceptive pricing, and Vantiv embroiled in the DraftKings fantasy sports lawsuit mess.
Note: In 2022,the defendent in the lawsuit pled guilty. We’re leaving this article as-is for historical purposes, but will no longer be updating it unless there is another lawsuit or important information related to CardReady’s situation.
The newest lawsuit is against payment processor CardReady, and comes from the Federal Trade Commission and the State of Florida.
- What is CardReady?
- Why is CardReady getting sued?
- What is credit card laundering?
- What do I do if I use CardReady?
What is CardReady?
CardReady is a payment processing company located in California. The company offers services for business that want to accept credit cards.
Why is CardReady getting sued?
CardReady is being sued for credit card laundering (also called factoring) and illegally assisting with a debt relief telemarketing scheme. From the FTC’s CardReady Lawsuit press release:
“…The FTC and the State of Florida alleged that CardReady LLC, an independent sales organization, and its executives, Brandon A. Becker, James F. Berland and Andrew S. Padnick, arranged for at least 26 shell merchant accounts to be used to process credit card payments for a debt relief operation[…] The agencies charged the payment processor defendants, as well as E.M. Systems & Services LLC, with credit card laundering under the TSR and illegal factoring of credit card transactions under Florida law. The FTC also charged CardReady and its executives with assisting and facilitating the debt relief scam.”
These charges allege that CardReady knowingly engaged in illegal and deceptive actions.
What is credit card laundering?
Credit card laundering is like money laundering, just with credit cards. A person or company wants to hide the source of its funds, so it first passes them through another medium.
If a company can’t get its own merchant account for credit card processing and convinces another company to let it use the other company’s account (usually by promising to pay the company a fee) that’s considered credit card laundering. A company is only allowed to use its credit card processing account for its own business transactions.
Credit card laundering is illegal. Additionally, letting another company use your merchant account to process transactions opens you up to financial problems like chargebacks. A common laundering scheme involves Company A convincing Company B to process transactions on its behalf and promising to pay Company B a cut of the sales. Company B then processes transactions for Company A’s customers… but Company A never provides the goods or services it sold to customers. Company A closes up shop and disappears. When its customers realize they never got their goods, they issue chargebacks with their banks. Then, since Company B processed the transactions, Company B is on the hook for those costs.
As a business, you should never take credit cards for any other company or for any reason other than to accept payment from your customers for good or services your company provides. Even if you don’t get sued, you could have your account terminated by the credit card companies and find yourself on the Terminated Merchant File list that makes it very difficult to get a processing account.
What do I do if I use CardReady?
You may want to consider getting quotes from other processors. You can sign up for free at CardFellow to get no-obligation quotes from reputable processors. All certified quotes through CardFellow feature favorable terms for businesses, such as true pass-through pricing to help you get the lowest costs, no cancellation fees, a lifetime rate lock, ongoing statement monitoring, and more.
CardFellow keeps your contact information private, and you won’t be pressured into a sale. Sign up today!
Information in this article does not constitute legal advice. If you have a question concerning your legal options, consult a licensed attorney.
