A $111 million scheme to keep bad merchants banked

This news serves as a critical warning for any retailer or operator regarding the integrity of their payment processing and merchant accounts. Thomas Eide of CB Surety was recently implicated in a $111 million scheme designed to help 'high-risk' merchants evade bank detection. The scheme used a technique called charge-back dilution. By running thousands of small, unauthorized charges on prepaid cards, the company artificially lowered the merchant's charge-back ratio. This kept their accounts under the radar of banks and payment networks like Visa and Mastercard, which typically shut down merchants exceeding a 1% threshold. For your business, this underscores the extreme risks of working with 'creative' payment processors who promise to fix your standing with banks through non-traditional means. The Department of Justice is increasingly aggressive in pursuing these laundering-adjacent schemes. If a service provider offers to 'manage' your charge-back ratios using methods other than genuine customer service and dispute resolution, it could lead to permanent blacklisting by major networks. Maintaining a transparent relationship with your lender and processor is the only way to ensure long-term stability in your consumer financing operations. Avoid any third-party services that seem to mask your transaction data or volume metrics.

Source: American Banker — Top News

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