The Federal Trade Commission (FTC) has fined Paddle $5 million over allegations that the UK-based payment processor enabled fraudulent foreign tech support operations. These schemes are reported to have defrauded U.S. consumers out of significant amounts of money.

A Shift in Responsibility

In past cases, payment processors were often seen as neutral third parties. However, the FTC’s identification of Paddle as a responsible party for preventing such risks could have broader implications for the industry.

We are witnessing a shift in accountability towards preventing fraudulent transactions to better protect consumers from deceptive practices,” noted Suzanne Sando, Lead Analyst of Fraud Management at Javelin Strategy & Research. This not only includes compensation for victims but also stricter enforcement and implementation of robust transaction monitoring systems and reporting suspicious activities.”

The fine aims to recoup some losses for fraud victims, with Paddle required to obtain explicit consumer consent for subscriptions and provide a straightforward cancellation process. The company is permanently barred from processing payments for tech support businesses using telemarketing or pop-up security alerts.

I am cautiously optimistic that this signals more promising consumer protections,” Sando added. Addressing the serious issue of fraud and scams affecting U.S. consumers will require such measures to significantly reduce suspicious activities.”

Paddle’s Response

Paddle downplayed the charges, highlighting that only a small portion of its clients were involved in illegal activity. The company also pointed out that the FTC’s final charges related to just two telemarketing clients.

Paddle serves over 6,000 digital product companies, which collectively bring immense value to consumers worldwide,” said Paddle CEO Jimmy Fitzgerald. Unfortunately, there are some bad actors in our midst.”