The Federal Trade Commission and Washington state sued Riverside Payments Inc. on Nov. 2, accusing the payment processor of promising small businesses savings of 40% to 60% when businesses that switched typically paid more, the FTC said.
The FTC Riverside Payments order settles the case for $600,000 against a judgment of $32,083,921, or 1.9% of the total, a calculation from the two figures. The court would suspend the rest because the defendants say they cannot pay, and the full amount comes due if they lied about their finances.
What the FTC Says Riverside Promised
The defendants are Riverside, its affiliate Cascade Equipment Leasing LLC and the company’s owners and executives, Brandon Skinner and Jason Reese. The FTC and Washington filed the complaint and a stipulated final order in the U.S. District Court for the Western District of Washington. The commission voted 2-0.
The FTC says Riverside’s sales quote sheet compared a client’s current processing costs with supposed savings but left out activation, batch, data security non-compliance and inactive processing fees. It also says Riverside promised “risk-free” cancellation at any time without penalty, and that it said it would switch unsatisfied businesses back to their original processor and pay them $500. Those promises were false, the FTC said.
Contract Terms the FTC Says Riverside Left Out
The 26-page electronic contract did not clearly disclose that processing services renew automatically after the initial three-year term or that cancellation carries a $695 early termination fee, according to the FTC. It also did not clearly disclose what leasing a processing machine from Cascade would cost. The FTC says that lease renewed automatically and ran one year longer than the processing contract. Businesses that tried to cancel often got no response, sat through unproductive calls or waited for callbacks that never came, the FTC said. Some heard there was no direct cancellation line, even when they were willing to pay the $695 fee.
What the Proposed Order Requires
For 60 days, Riverside must waive the early termination fee and any penalty for rescinding a processing agreement, and it must tell customers. The order bars the defendants from misrepresenting costs, savings or cancellation terms, from making unsubstantiated savings or earnings claims and from misrepresenting automatic renewal. They must disclose all material terms before taking billing information, get express informed consent for automatic renewal and provide a simple way to cancel. Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said, “The FTC will hold accountable companies that deceive small businesses.”
Sales Agent Earnings Claims
The complaint also covers the people who sold for Riverside. The FTC says the company advertised annual earnings of $75,000 to $95,000 for commission-based sales agents, and “100k” for top agents, while agents averaged $3,787 a year. The average is between 4% and 5% of the advertised range, a calculation from the FTC’s figures. The FTC also alleges violations of the Gramm-Leach-Bliley Act, on the theory that Riverside obtained consumers’ financial information through false or fraudulent statements. Image: Federal government imagery from the FTC (public domain).
