FTC and Washington settle Riverside Payments case with $600,000 payment

The Washington Attorney General and Federal Trade Commission (FTC) on 2 November announced a settlement with Riverside Payments Inc., Cascade Equipment Leasing and the companies’ owners over alleged deceptive payment-processing practices. Under the proposed settlement order, the defendants will pay $600,000. A $32m judgment will be suspended after payment, but the full amount will be due if they are found to have misrepresented their finances.

The settlement gives eligible Washington small businesses compensation based on their processing volume during the previous six months and lets them cancel merchant-processing agreements without an early termination fee or other rescission penalty for 60 days. The FTC and Washington filed the complaint and order in the US District Court for the Western District of Washington.

The alleged sales and cancellation practices

The complaint alleges that Riverside told businesses they could save nearly 60% by switching processors, but that customers typically paid more than with their previous provider. Riverside allegedly failed to clearly disclose automatically renewing service contracts, a $695 early termination fee and the cost of leasing payment equipment from Cascade.

The companies also allegedly advertised a “no-risk” guarantee while putting customers through a “complicated loop of deflection and fruitless phone calls” when they tried to cancel.

The complaint further alleges that Riverside made unsubstantiated earnings claims to commission-based sales agents. Advertisements said agents could earn $75,000 to $95,000 annually and that top agents could make “100k”. The complaint says agents earned about $3,800 per year on average.

The FTC alleged violations of the FTC Act and the Gramm-Leach-Bliley Act, including obtaining consumers’ financial information through false or fraudulent statements. Washington alleged violations of the Washington Consumer Protection Act.

The order’s controls

The order would prohibit the defendants from:

- misrepresenting costs, savings, cancellation conditions or other material facts;
- making unsubstantiated customer-savings or sales-agent earnings claims; and
- misrepresenting any aspect of a negative-option feature.

A negative option treats a customer’s failure to act as consent to pay or enrol in recurring charges. Before obtaining billing information, the defendants must clearly and conspicuously disclose all material transaction terms, obtain express informed consent to use a negative-option plan and provide a simple cancellation method.

The defendants must notify customers that Riverside will waive the early termination fee or any penalty for rescinding merchant-processing agreements during the 60-day period. The settlement follows Washington Attorney General Nick Brown’s July settlement with Block over Cash App consumer-protection allegations, according to the Attorney General’s enforcement announcement.