Clearwater fraud protection firm fined $150K for using 'unfair' tactics

Chargebacks911, a Clearwater firm that says it seeks to mitigate chargebacks from credit cards to consumers, agreed to a settlement with the Federal Trade Commission that the FTC says will prohibit the company from working with certain high-risk clients "and using deceptive tactics to stop consumers trying to dispute credit card charges through the chargeback process."

The settlement order, if and when it's approved, will require the defendants to pay $100,000 in civil penalties and $50,000 in legal costs to the state of Florida. 

In a complaint from April 2023, the FTC and Florida state government charged that, since at least 2016, the "chargeback mitigation" company and its owners, Gary Cardone and Monica Eaton, used multiple unfair techniques to prevent consumers from winning chargeback disputes.

"The settlement order will provide important protections for consumers who shop online," says Samuel Levine, the director of the FTC's Bureau of Consumer Protection in the statement. "It sends a clear message that chargeback mitigation companies must not undermine consumers' ability to exercise their rights."

The FTC says the chargeback process is "a key protection for consumers who wish to contest unwanted, fraudulent or incorrect credit card charges. When a consumer sees a charge they did not authorize, or for which the promised goods or services didn't arrive, they can dispute the charge with their credit card company. The consumer's credit card company then contacts the merchant’s credit card company for information and determines whether to reverse the charge."

The FTC and Florida officials contended Chargebacks911 sent materials it knew, or should have known, were misleading or inaccurate to credit card companies on behalf of their clients, including screenshots of websites that were different than the ones visited by consumers.

The complaint also alleged Chargebacks911 used its Value-Added Promotions service to game the systems credit card companies use to detect fraud on their payment networks.

The proposed court order, which was agreed to by the defendants and must be approved by a federal judge before it can go into effect, would also prohibit Chargebacks911 and its owners from "knowingly using deceptive or misleading information on behalf of their clients" and would prevent them from "using techniques like their Value-Added Promotions service to help clients evade fraud-monitoring programs."

The FTC filed the proposed order in the U.S. District Court for the Middle District of Florida. Stipulated final orders have the force of law when approved and signed by the federal judge.

Monica Eaton founded Chargebacks911 as a consulting business in 2010, when, she told the Business Observer, her online retail store was bombarded with bank fees caused by customers disputing charges. By 2013 that company was doing $8 million in sales.