Chargebacks911 in face-off with FTC, Florida AG

Chargeback mitigation company Chargebacks911 is in the hot seat for "unfairly thwarting consumers" who were trying to use the chargeback process to dispute credit card charges, according to a complaint filed by the Federal Trade Commission and Florida's attorney general.

"Chargebacks911 helped scammers stay in business and defeat chargeback attempts by consumers hit with fraudulent charges," said Samuel Levine, director of the FTC's Bureau of Consumer Protection.

The FTC and Florida's AG allege that Chargebacks911 "has, for numerous clients, used misleading information to contest chargebacks," and that the company "has ignored numerous red flags" that it was using faulty information to help merchants dispute chargebacks.

They also took issue with a program the company ran from 2013 to 2019 that helped merchants with a lot of chargebacks to evade scrutiny from the card networks, as well as fines and terminations. The program, known as VAP (for Value Added Promotions), encouraged merchants to run numerous small-dollar transactions (via prepaid debit cards) to boost their total transactions number, and thereby lowering the percentage of transactions disputed by consumers.

In a complaint, filed on April 12, 2023, in U.S. District Court for the Middle District of Florida, FTC lawyers and Florida's AG noted that Chargebacks911 counted as clients several companies that have been sued by the FTC for deceiving consumers, including Apex Capital, F9 Advertising and AH Media.

Customers of all three companies complained they had signed up for free trial offers only to be charged for ongoing subscriptions.

Mismatched web pages

Chargebacks911 disputed more than 47,000 chargebacks for Apex between January 2016 and November 2028, the complaint noted. More than 77,000 chargebacks were disputed on behalf of AH Media between January 2017 and July 2019, and 41,000 were handled for F9 from September 2016 and January 2018.

According to the complaint, Chargebacks911 regularly sent screenshots to credit card issuers, on behalf of its clients, that would indicate consumers had agreed to the disputed charges—primarily recurring subscription payments. But, the complaint states, all too often the screenshots sent didn't match up with actual product pages.

For example, in numerous chargeback disputes involving AH Media, Chargebacks911 used screenshots from AH Media's "bank pages," which included disclosures of terms. Actual sales, however, originated from consumer-facing websites "that lacked clear and conspicuous disclosures about the trial offers," the complaint alleges.

"Despite the red flags indicating that Chargebacks911's representments were misleading, the company continued with its same chargeback dispute practices, and chose not to investigate the accuracy of information provided by its negative-option clients providing misleading information, or notify banks that the representments it had previously submitted may have included misleading information," the complaint states.

The FTC and Florida AG allege that Chargebacks911, Cardon and Eaton Cardone are violating the FCT Act and the Florida Unfair and Deceptive Trade Practices Act. They are asking the court to impose a permanent injunction against the alleged illegal activities, plus civil penalties and compensation for effected consumers.

The accused says FTC, AG dead wrong

In a statement issued on April 14, Chargebacks911 said the accusations are "inaccurate," and that the complaint was a product of government "overreach."

"The complaint misunderstands Chargebacks911's role in the industry and makes a series of inaccurate accusations that are factually and legally wrong, setting a dangerous precedent for all SaaS companies that could interrupt the roles, rights and obligations of stakeholders industrywide," the company stated. "We have always followed all the rules, laws and processes, and will aggressively defend the purpose of our business, the privacy of our clients, and our own corporate ethics and reputation against overreach by the government and its various policing bodies."

Chargebacks 911 added that chargeback mitigation firms don't make the final decisions on chargebacks; only the involved financial institutions or consumers themselves can drop a claim. Chargebacks911 offered additional perspective, describing its software as akin to TurboTax and Docusign in that users configure packages/templates, populate/insert information, and transmit information to a designated destination. The SaaS providers are not expected to verify the veracity of information sent.

Insisting that Chargebacks 911 is responsible for the accuracy of data that goes through its SaaS platform "is tantamount to telling Microsoft that they are responsible for any fraudulent statement that is made in a Word document, or assigning liability to any fraudulent tax return that is compiled through TurboTax," Chargebacks911 insisted.

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