Payment Processor for MOBE Business Coaching Scheme Settles FTC Charges

A payment processor that allegedly ignored clear warning signs its client was operating an unlawful business coaching and investment scheme will be barred from processing payments in the business coaching field under a settlement with the Federal Trade Commission.

According to the FTC’s complaint against California-based Qualpay, the company for years processed payments for MOBE, a scheme the FTC alleged charged consumers hundreds of millions of dollars for worthless business coaching products, and that Qualpay ignored numerous signs that MOBE was a fraudulent business.

“Ignoring clear signs that your biggest customer is a bogus online business opportunity is no way to operate a payment processing business,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “And, it’s a sure-fire way to get the attention of the FTC.”

The red flags listed in the complaint include questions about whether MOBE was a domestic or international company, the nature of MOBE’s business model, MOBE’s history of excessive chargebacks, and claims MOBE made in its marketing materials about helping consumers make “hundreds of thousands of dollars per year.” 

The complaint also alleges that Qualpay failed to follow its own internal policies when it came to managing MOBE’s accounts. Specifically, the company failed to review MOBE’s business practices in detail, which would have revealed numerous elements that should have eliminated MOBE as a client under Qualpay’s policies.

Even after Qualpay took on MOBE as a client, MOBE’s processing data immediately raised red flags related to the quantity of charges it processed and the number of refunds and chargebacks associated with those charges. When MOBE experienced excessive chargeback rates, instead of adequately investigating the causes of MOBE’s chargebacks, Qualpay responded by requiring MOBE to work closely with chargeback prevention companies.  Even though MOBE was generating excessive chargebacks, Qualpay failed to monitor the products MOBE was selling and the claims it was making to sell those products. A Qualpay employee reported, ‘We cannot monitor their business and have no idea what is going on.”   

Under the terms of its settlement with the FTC, Qualpay will be prohibited from processing payments for business coaching companies or other merchants designated as high-risk for a number of reasons. The settlement also prohibits Qualpay from making, or assisting merchants in making, deceptive statements to consumers or working to avoid fraud or risk monitoring programs. Qualpay will also be required to engage in careful screening and monitoring of card-not-present merchants. 

The settlement imposes a monetary judgment of $46,779,358.91, which is suspended due to Qualpay’s inability to pay. Qualpay is also required to surrender any claims to MOBE assets being held by the receiver in the MOBE case.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 4-0-1, with Commissioner Rebecca Kelly Slaughter voting as not participating. The FTC filed the complaint and final order in the U.S. District Court for the Middle District of Florida.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge.