FTC Sues Chargebacks911 and Alleges Use of Unfair Techniques

Chargeback mitigation company Chargebacks911 has been sued by the Federal Trade Commission (FTC) and Florida.

The lawsuit alleges that the company used unfair techniques on behalf of its clients against consumers who contested credit card charges, the FTC said in a Wednesday (April 12) press release.

“Chargebacks911 helped scammers stay in business and defeat chargeback attempts by consumers hit with fraudulent charges,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in the release. “The FTC will continue to take aggressive action against those who undermine consumers’ ability to exercise their rights.”

Reached for comment by PYMNTS, Chargebacks911 provided a statement in which it said it is “disappointed” that the FTC decided to bring this action.

“The complaint misunderstands CB911’s role in the industry and makes a series of inaccurate accusations that are factually and legally wrong,” the company said in the statement. “Rest assured, we take these allegations seriously and plan to mount a vigorous defense.”

“In the meantime, we pledge to our customers and the public that we are dedicated to operating with integrity in all aspects of our business and will continue to stand up for the rights of the consumer, merchants and the industry,” the statement added.

According to the complaint filed in federal court, Chargebacks911 sent misleading screenshots to credit card companies, supposedly showing that consumers had agreed to charges they later disputed. In some cases, the screenshots had been edited or showed web pages that were different from the ones on which the consumer made the purchase, the complaint said.

“These practices have likely resulted in consumers being denied chargebacks that otherwise should have been approved,” the complaint said.

The complaint also charges that the company helped its clients reduce the level of scrutiny they received from credit card companies by implementing a system that enabled clients to run numerous small transactions, thereby raising their total number of transactions and lowering the percentage that consumers disputed.

“Chargeback 911’s [Value Added Promotions (VAP)] service enabled fraudulent merchants to evade or delay chargeback monitoring programs, fines, and account terminations designed to protect consumers from fraud,” the complaint said.

The FTC and Florida note in the complaint that Chargebacks911’s clients include three companies that the FTC has sued for deceiving consumers.

The plaintiffs are asking the court to stop the illegal activities and order monetary relief, according to the press release.

In the statement provided to PYMNTS, Chargebacks911 said: “The chargeback process is an important consumer protection mechanism, and we do not condone deceptive or unfair practices. We are committed to serving our customers and ensuring that they have a positive experience with our company, and we shall remain the gold standard by which all chargeback/dispute management firms are measured.”

As PYMNTS reported in July 2022, chargebacks are transaction disputes initiated by cardholders. These may be initiated by cardholders who have experienced true fraud, who are confused or frustrated about their transactions, or who are simply using the chargeback process to avoid paying for goods and services.

Merchants understand the best way to address disputed cardholder transactions is with effective tools that first alert them to disputes and then help resolve them cleanly without revenue loss or damage to customer ties, according to “Dispute-Prevention Solutions: Protecting Profits and Customer Relationships with Third-Party Tools,” a PYMNTS and Verifi collaboration.