Daily Archives: 01/03/2003

CMS & FTC Settle

The FTC announced a final settlement with TX-based Certified Merchant Services which requires the firm to stop their deceptive practices and provide consumer redress for defrauded merchants to whom CMS sold credit card processing services. The settlement requires the firm to sell its assets to provide money for consumer redress. The FTC complaint alleged that CMS violated the FTC Act by unfairly and deceptively: 1) modifying customer contracts; 2) debiting their accounts without authorization; 3) making misrepresentations regarding various goods or services offered; and 4) failing to disclose various charges or fees. The complaint alleged that in many instances, after merchants had signed applications (and without their knowledge), CMS altered contract terms, including fee and expense information. CMS allegedly then used these changes to justify debits made from the merchants’ deposit accounts without notification to the merchants. CMS then tried to disguise these debits, listing “H-Semi” and “H-Can,” instead of CMS, as the company that withdrew the fees. Finally, the complaint alleged that in many instances CMS deceptively failed to disclose, clearly and conspicuously, that they would charge merchants certain fees, including a minimum of $25 if the merchants did not achieve a certain level of card sales; a semi-annual fee of between $33 and $50; and a cancellation fee of between $300 and $400 for cancelling within three years of signing a service contract.