Payments firm Paddle settles FTC complaint, faces scrutiny over client screening

A UK-based payments processor will pay $5m and be permanently banned from processing payments for tech-support telemarketers in a settlement with the Federal Trade Commission.

The settlement following an FTC action which alleged that Paddle.com Market Limited, and its subsidiary, Paddle.com, Inc., “enabled deceptive foreign operators to access it, costing consumers millions of dollars.”

Paddle specialises in payments for SaaS and digital product companies, operating as “a merchant of record”.

The FTC had alleged that “Paddle and its subsidiary processed payments for deceptive tech-support schemes that targeted U.S. consumers including older adults.”

This included facilitating schemes like “Restoro-Reimage, that allegedly used fake virus alerts and pop-up messages to impersonate familiar brands, such as Microsoft or McAfee.”

Under the agreement, the FTC said, Paddle is “Permanently prohibited from processing payments for tech-support merchants that engage in telemarketing or use pop-up messages about computer security or performance”.

Other stipulations include that it “implement effective client screening and monitoring, and provide periodic reporting about merchant-clients’ transactions to Paddle’s payment-service providers” and “clearly and conspicuously disclose the terms of any subscription it processes”.

In a statement, Paddle said over five years ago it had “onboarded two companies that the FTC alleges then participated in deceptive telemarketing upsell practices outside of Paddle.”

It said that “We find their alleged behaviour and its impact on consumers abhorrent.”

It added that “The FTC acknowledged that Paddle did not process any payments for deceptive telemarketing practices.”

Paddle said the settlement did not call for any material changes to its business model, adding that “As the sophistication of bad faith actors around the world has evolved, so too has Paddle’s risk, compliance and governance capability.”

It added that Paddle is “not admitting to any of the allegations in the complaint except for those limited formalities necessary to establish jurisdiction.”

“We believe the agreement with the FTC will memorialize our strong risk governance, setting the bar for both ourselves and for the wider industry" said Rob Fletcher, President at Paddle. “We are grateful for the positive engagement we have had with the FTC."

The $5m payment will pooled with the $26m paid to the FTC by the companies involved in the Restoro-Reimage case to compensate affected consumers.