FTC Fines Payment Processor $12 Million Over Sham Merchant Scams
The Federal Trade Commission announced on September 8, 2026, that payment processor Humboldt Merchant Services will pay $12 million and be permanently banned from processing payments for merchants the agency considers high risk for fraud. The settlement resolves allegations that Humboldt knowingly processed transactions for more than 1,000 shell companies that fronted for businesses engaged in unauthorized billing scams.
If you have ever had an unexplained charge show up on your credit card statement from a company you don’t recognize, this case touches on exactly the kind of infrastructure that can make those scams possible. Payment processors like Humboldt sit between merchants and the banks that approve or deny card transactions. When a processor looks the other way on warning signs, fraudulent billing schemes can keep collecting money from consumers’ accounts.
What the FTC Says Humboldt Did
According to the FTC’s complaint, Humboldt opened and processed payments for merchants it knew, or consciously avoided knowing, were shell companies controlled by undisclosed third parties engaged in fraud. One of the entities named in connection with the case is Legion Media, a company the FTC shut down in 2024.
The complaint alleges these sham merchant accounts typically incurred chargeback rates that were almost 10 times higher than what credit card brands consider excessive. A chargeback happens when a cardholder disputes a charge and the bank reverses it â a high rate is generally treated by the industry as a red flag for fraud or unauthorized billing.
The FTC also alleges that Humboldt tried to increase the volume of transactions processed through these accounts by placing them on a lower-risk bank identification number, or “BIN,” that was used by an affiliated entity. A BIN is licensed by the credit card networks, and using a lower-risk one for high-risk merchants can make it more likely that a cardholder’s bank will approve a suspicious transaction rather than block it.
What the Settlement Requires
Under the proposed order, filed in the U.S. District Court for the Eastern District of Michigan, Humboldt must pay $12 million for consumer redress. The order also permanently prohibits the company from:
- Engaging in or assisting others engaged in credit card laundering
- Processing payments for straw companies
- Processing payments for merchants on the Mastercard Alert to Control High-Risk (MATCH) list for reasons including excessive chargebacks, laundering, or fraud
- Processing payments for merchants that have been subject to law enforcement action
- Processing payments for e-commerce entities that use only a third-party mailbox address, such as a UPS store, as their business location when those entities also use negative option billing, are new, or lack a processing history
- Making or assisting others in providing false or misleading information to obtain payment processing
- Engaging in or assisting tactics used to avoid fraud and risk monitoring, including a practice known as load balancing
The Commission’s vote approving the filing of the proposed order was 2-0. Stipulated final orders carry the force of law once a district court judge signs off, but the FTC’s announcement notes this order is still proposed and awaiting court approval.
Who This Affects
Consumers who were billed by merchants processed through Humboldt’s sham accounts, including those tied to Legion Media’s unauthorized billing scheme, are the direct focus of this action. The $12 million payment is designated for consumer redress, meaning it is intended to compensate people who lost money to these fraudulent billing operations, though the FTC’s announcement does not specify how or when individual payments will be distributed.
More broadly, the case is relevant to anyone who uses a credit or debit card for online purchases or subscriptions. “Negative option billing” â a term the FTC’s order specifically addresses â refers to arrangements where a company continues charging a customer unless the customer takes action to cancel. The order’s restriction on processing for mailbox-only e-commerce entities using this billing model targets a business setup the FTC has flagged as a common structure for scams.
Deputy Director’s Statement
Katherine White, Deputy Director of the FTC’s Bureau of Consumer Protection, said in the announcement, “Humboldt was processing payments for companies despite red flags indicating they were scamming consumers. This case underscores the FTC’s commitment to holding companies accountable for knowingly supporting fraudulent businesses.”
What to Check on Your Own Statements
The FTC’s press release does not list a claims process or timeline for consumers seeking redress from this specific case. Anyone who believes they were charged by a merchant connected to Legion Media or a similar unauthorized billing scheme can review their credit and debit card statements for unfamiliar recurring charges. The FTC’s own consumer guidance channels, including ReportFraud.ftc.gov, are the agency’s designated intake points for reporting suspected fraud or bad business practices, as noted in the FTC’s press release.
If you spot a recurring charge on a statement that you do not recognize or did not authorize, contact your card issuer directly to dispute it and ask about the chargeback process before the transaction ages past your bank’s dispute window.
This is a News-lane report. It was drafted automatically from the linked primary source and published after automated checks that every figure appears in that source. It is summarised regulatory news, not evergreen guidance and not financial advice. See our AI content disclosure and disclaimer.
