Penalty Amount
$12,000,000
The FTC alleged that payment processor Humboldt Merchant Services knowingly processed payments for more than 1,000 shell merchant entities serving as fronts for fraudulent companies engaged in unauthorized billing scams, despite red flags including chargeback rates nearly 10 times higher than card-brand thresholds. Under the proposed stipulated order filed in the U.S. District Court for the Eastern District of Michigan, Humboldt will pay $12 million for consumer redress and is permanently banned from processing payments for merchants with a heightened risk of potential fraud.
Humboldt must pay $12 million for consumer redress and is permanently banned from: engaging in or assisting credit card laundering; processing payments for four high-risk merchant categories (straw companies, merchants on the Mastercard MATCH list for excessive chargebacks/laundering/fraud, merchants subject to law enforcement action, and certain e-commerce entities using third-party mailbox providers that use negative option billing or lack processing history); making or assisting false or misleading statements to obtain payment processing; and engaging in tactics to evade fraud and risk monitoring, including load balancing.
In-house teams should review merchant services agreements, payment processing/gateway contracts, acquirer and bank sponsorship agreements, and any affiliate arrangements for payment routing. Key clauses to scrutinize include merchant underwriting and KYC representations, chargeback monitoring thresholds and termination triggers, express prohibitions on credit card laundering and load balancing (including routing transactions through affiliated or lower-risk BINs), restrictions on negative option billing, use-of-proceeds and pass-through account restrictions, representations that the entity is not a shell or straw company, and indemnification for chargebacks and fraud losses. Companies operating as payment facilitators or aggregators should also review onboarding diligence obligations, ongoing monitoring and audit rights over sub-merchants, termination rights tied to MATCH list placement or law enforcement action, and compliance-with-card-network-rules covenants, since the FTC's order effectively makes these risk controls a regulatory expectation for the payments industry.
Entity
Humboldt Merchant Services
Industry
Financial ServicesOfficial Press Release
https://www.ftc.gov/news-events/news/press-releases/2026/09/ftc-takes-action-against-payment-processor-humboldt-merchant-services-knowingly-facilitating-payment
Humboldt Complaint
https://www.ftc.gov/system/files/ftc_gov/pdf/Humboldt-Complaint.pdf
Humboldt StipulatedOrder
https://www.ftc.gov/system/files/ftc_gov/pdf/Humboldt-StipulatedOrder.pdf
Federal Trade Commission Enforcement Page
https://www.ftc.gov/enforcement
"Payment processing company Humboldt Merchant Services will pay $12 million and be permanently banned from processing payments for merchants with a heightened risk of potential fraud to settle allegations that Humboldt processed payments for merchants that defrauded consumers."
"In addition to paying $12 million for consumer redress"
"September 8, 2026"
"Under proposed order, defendant will be required to pay $12 million, stop payment processing for certain categories of merchants"
"shell entities that served as fronts or pass-throughs for fraudulent companies engaged in unauthorized billing scams"
"Humboldt was processing payments for companies despite red flags indicating they were scamming consumers"
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