The Federal Trade Commission (FTC) and the State of Florida have jointly filed a lawsuit against Chargebacks911, a chargeback mitigation company, and its owners, Gary Cardone and Monica Eaton Cardone. The suit alleges that the company used unfair techniques to prevent consumers from successfully disputing credit card charges through the chargeback process. According to the complaint, Chargebacks911 helped scammers stay in business and defeated chargeback attempts by consumers hit with fraudulent charges. The FTC has vowed to take aggressive action against those who undermine consumers’ ability to exercise their rights.
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 did not arrive, they can dispute the charge with their credit card company. The company then contacts the merchant’s credit card company for information and determines whether to reverse the charge. Chargebacks911 allegedly prevented this process from working for consumers.
The complaint filed by the FTC and Florida alleges that Chargebacks911 regularly sent screenshots on behalf of its clients to credit card companies that supposedly showed that consumers had agreed to disputed charges, often recurring monthly subscription charges. However, the complaint notes that in many instances, these screenshots were not actually from the website where consumers made the disputed purchases. Additionally, Chargebacks911 allegedly ignored clear warning signs that the website screenshots were misleading.
Chargebacks911 also allegedly used a system called Value Added Promotions (VAP), which allowed the company’s clients to run numerous small-dollar transactions via prepaid debit cards. By doing so, clients could raise their total number of transactions, lowering the percentage of their charges that were disputed by consumers. The percentage of chargebacks a company faces plays a role in the level of scrutiny a company receives from credit card companies; a higher percentage will likely lead to more scrutiny.
The complaint further alleges that Chargebacks911 served numerous companies that the FTC has sued for deceiving consumers, including Apex Capital, F9 Advertising, and AH Media. The company disputed tens of thousands of chargebacks on behalf of each of those companies. There were many instances where Chargebacks911 submitted screenshots of websites on behalf of Apex Capital and AH Media where the name of the product on the sites in the screenshots did not even match the brand name of the product for the disputed purchase.
According to the complaint, Chargebacks911 regularly overlooked other suspicious behaviors from their clients, including when clients used a large number of different merchant accounts to process charges. The FTC and Florida allege that Chargebacks911, Gary Cardone, and Monica Eaton Cardone are violating both the FTC Act and the Florida Unfair and Deceptive Trade Practices Act, and are asking the court to stop the defendants’ illegal activities and order monetary relief, including compensation for consumers and civil penalties.
The Commission vote authorizing the staff to file the complaint was 3-0-1, with then-Commissioner Christine S. Wilson recorded as not voting. The vote on this matter closed on March 29, 2023, prior to Commissioner Wilson’s departure from the Commission. The complaint was filed in the U.S. District Court for the Middle District of Florida.
The Federal Trade Commission works to promote competition and protect and educate consumers. The FTC staff attorneys on this matter are Evan Rose and Bobbi Tonelli of the FTC’s Western Region San Francisco. The case will now be decided by the court.
The FTC has previously taken action against companies that engage in unfair and deceptive practices. In 2022, the Commission filed a complaint against Apex Capital and its CEO, alleging that they had deceived consumers through false advertising and fake endorsements. The Commission also charged F9 Advertising and its CEO with misleading consumers