Is the FTC Targeting Chargeback Service Providers?

In an article published on November 1, 2024, in Payments Dive, AGG Payment Systems & Fintech co-chair Ed Marshall discusses how the FTC’s stance on chargeback mitigation services in the merchant marketplace is evolving.

Ed mentions that the FTC has worked diligently to understand the payment system, and its knowledge of the industry has become increasingly nuanced. With most FTC lawsuits having the same three attributes, one of which being elevated chargeback ratios, it’s not surprising that the FTC is skeptical of chargeback servicers providers.

While chargeback mitigation services have traditionally been viewed as a useful way to reduce cost and friction while assisting merchants, the FTC has historically taken a different view. This was demonstrated in 2023, when the FTC took enforcement action against Chargebacks911, which pioneered chargeback mitigation services, Ed writes. Today, it’s clear that while the FTC is still unconvinced, it hasn’t quite made up its mind on the services.

“In the meantime, merchant acquirers should exercise some degree of caution partnering with, or recommending that merchants partner with, chargeback service providers,” Ed concludes. “There seems to be a dawning recognition by regulators that chargeback mitigation has a legitimate and potentially valuable role to play in the payments industry.”

To read the full article, you may click here.