Payment processor QualPay agreed to pay $46.7 million to the Federal Trade Commission, settling charges it enabled the fraudulent MOBE online business scheme. The FTC accused QualPay of processing transactions for MOBE, an operation that falsely promised customers they could earn "hundreds of thousands of dollars per year" through its business coaching programs.
QualPay ignored numerous warning signs about MOBE's activities. The FTC complaint detailed significant red flags, including confusion over whether MOBE operated as a domestic company, unclear specifics about the business model itself, and an overwhelming volume of chargebacks from disgruntled customers. These issues should have triggered immediate scrutiny under QualPay's own risk management policies. Yet, the company never conducted a thorough review of MOBE's business practices, a process that would have revealed MOBE did not meet QualPay's client standards.
Andrew Smith, who leads the FTC's Bureau of Consumer Protection, criticized QualPay's conduct. "Ignoring clear signs that your biggest customer is a bogus online business opportunity is no way to operate a payment processing business," Smith stated. "And, it's a sure-fire way to get the attention of the FTC."
QualPay chose to settle the allegations rather than engage in a prolonged legal battle. The $46.7 million judgment was suspended, however, after the company claimed it could not pay the full amount. This suspension typically means the company pays what it can, and the remainder is held over its head if future assets are discovered.
The settlement imposes strict new rules on QualPay's operations. The company is now barred from processing payments for business coaching companies and other merchants deemed high-risk. QualPay also cannot help merchants make deceptive claims to consumers. It must not assist them in avoiding fraud detection systems. These restrictions aim to prevent the payment processor from facilitating similar consumer fraud in the future.
Payment processors are essential conduits in the financial system. They hold a unique position to observe transaction data, customer disputes, and refund patterns. Such data often provides early indicators of fraudulent schemes. When a processor fails to implement or enforce its own risk assessment protocols, it can inadvertently become a key enabler for scams. QualPay's failure to act on the clear signals from MOBE allowed the scheme to continue defrauding consumers for an extended period.
QualPay's legal troubles extended beyond the FTC's action. The company spent years in court fighting a receiver appointed to recover funds from MOBE. The receiver sought $6.3 million QualPay obtained from the fraudulent enterprise. QualPay lost that battle in August 2018, and a subsequent appeal went nowhere.
Separately, in January 2020, Synovus Bank, which provided payment services to QualPay, filed an intervention motion in the ongoing case. The court rejected Synovus's motion. Synovus appealed that decision. But with QualPay having now settled with the FTC, the relevance of Synovus's appeal appears significantly diminished.