The US Federal Trade Commission (FTC) has announced that UK-based payment processor Paddle.com Market Limited and its US subsidiary, Paddle.com, Inc., will pay US$5 million and are permanently banned from processing payments for tech-support telemarketers.

The settlement resolves allegations that the companies enabled deceptive foreign operations to exploit the US credit card system, resulting in significant consumer harm.

In its complaint, the FTC alleged that Paddle knowingly facilitated payments for fraudulent tech-support schemes targeting US consumers, including older adults.

“Paddle provided foreign-based tech-support schemes with access to the US payment system, allowing these companies to harm consumers,”

said Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection.

“The FTC will hold accountable payment companies that knowingly facilitate payments for scammers or look the other way when faced with red flags about their clients’ conduct.”

According to the FTC, Paddle falsely claimed to be a “merchant of record” or software “reseller” in order to open merchant accounts and process card payments on behalf of numerous unrelated third-party merchants.

This allowed overseas schemes to collect payments from US consumers while evading scrutiny from banks and card networks.

Among the schemes facilitated was Restoro-Reimage, which allegedly used fake virus alerts and pop-up messages impersonating familiar brands such as Microsoft and McAfee to mislead consumers.

As the “merchant of record,” Paddle charged consumers for subscriptions that automatically renewed, without clearly disclosing that they would incur recurring charges.

The FTC alleges that Paddle violated the FTC Act, the Telemarketing Sales Rule, and the Restore Online Shoppers’ Confidence Act.

In a related case, Paddle’s client Restoro-Reimage paid US$26 million in March 2024 to settle similar charges brought by the Commission.

Under the terms of the proposed settlement order, Paddle is permanently prohibited from processing payments for tech-support merchants who use telemarketing or pop-up messages related to computer security or performance.

The company is also barred from supporting deceptive merchants or engaging in practices intended to bypass fraud and risk-monitoring programmes established by banks and card networks.

Paddle must implement stringent client screening and monitoring procedures and provide regular transaction reports to its payment-service providers.

This agreement formalises that existing policy and confirms that these types of merchants will continue to be excluded from Paddle’s services.

Additionally, the company is required to disclose subscription terms clearly, obtain consumers’ express informed consent, and offer a simple method for cancelling subscriptions and stopping recurring charges.

In response, Paddle acknowledged that more than five years ago, it onboarded two companies that the FTC now alleges participated in deceptive telemarketing upsell practices outside of Paddle’s platform.

The company emphasised that it did not process payments for the alleged telemarketing misconduct and found the clients’ behavior “abhorrent.”

“We do not wish to profit from our association with these two companies, and so the settlement includes an amount of US$5 million to reflect that,”

the company stated.

Paddle highlighted that it serves over 6,000 digital product companies globally and reaffirmed its commitment to compliance and consumer protection.

Jimmy Fitzgerald, CEO of Paddle, stated:

“Whilst we believe that almost all digital product companies are ‘forces for good’, it is sadly a reality that there are some bad faith actors out there.”

The US$5 million payment will be used to bolster consumer redress related to the Restoro-Reimage scheme.

The Commission voted 3-0 to approve the complaint and proposed settlement. Chairman Andrew N. Ferguson issued a supporting statement, joined by Commissioners Melissa Holyoak and Mark R. Meador.

The complaint and settlement were filed in the US District Court for the District of Columbia.

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