FTC Takes Action Against First American’s Exit Fees

The Federal Trade Commission has accused payment processor First American Payment Systems and two of its sales affiliates of “trapping small businesses with hidden terms, surprise exit fees, and zombie charges.”

According to a Friday (July 29) news release from the commission, First American is accused of making false claims about fees and savings to attract merchants, many of whom spoke limited English, and also “made it difficult and expensive for them to cancel the service.”

In addition, the FTC accuses First American of making withdrawals from businesses’ accounts even after the business had withdrawn its consent — the so-called “zombie” charges — in some cases attempting to make withdrawals under different business names to get around stop payment orders.

A spokesman for First American based in Fort Worth, Texas, told PYMNTS in an email Friday afternoon that the FTC’s allegations were “inflated and inaccurate.”

The spokesman said: “First American flatly denies the allegations in the FTC complaint, which are one-sided and based on a flawed understanding of our business and our industry … We did not use tricks or traps to lure business owners, nor did we create barriers to exiting our services or charge surprise or illegal fees. We did not withdraw money for the services we provided to merchants without their authorization.”

According to the commission, a proposed federal court order — which the FTC says First American has agreed to — requires the company to return $4.9 million to affected businesses, stop the deception, and make it easier for merchants to cancel the company’s services.

The First American spokesman said the company “fully cooperated throughout the entire investigation” and “agreed to settle this case to avoid a long, protracted legal battle and the associated expense.”

The FTC said the court order would block First American from misleading consumers about cancellation fees and stop unauthorized bank withdrawals and early termination fees.

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