The FTC and the State of Washington filed a complaint against payment processor Riverside Payments Inc., affiliate Cascade Equipment Leasing LLC, and their operators Brandon Skinner and Jason Reese. The complaint alleges that the defendants falsely promised small businesses savings of 40% to 60% by switching payment processors, while customers typically ended up paying more than they had with their previous provider.

According to the complaint, Riverside’s comparison quotes omitted fees, including activation, batch, data-security non-compliance and inactive-processing fees. Key terms were also allegedly buried in a 26-page electronic contract and not clearly explained by sales agents. These terms included automatic renewal after an initial three-year processing agreement, a $695 early termination fee, and equipment leases from Cascade that automatically renewed and lasted a year longer than the processing contract.

The FTC and Washington further allege that Riverside advertised a “no-risk” cancellation guarantee, promising customers they could cancel without penalty, return to their former processor and receive $500 for their time and hassle. In practice, customers seeking to cancel allegedly received no response or were directed through repeated, unsuccessful calls and told to wait for a callback. The complaint also challenges Riverside’s earnings claims to commission-based sales agents: although advertisements said agents could earn $75,000 to $95,000 annually and top agents could make $100,000, the complaint says agents earned an average of $3,787 per year.

The FTC alleges violations of the FTC Act and the Gramm-Leach-Bliley Act, including obtaining consumers’ financial information through false or fraudulent statements. The proposed order imposes a $32,083,921 judgment against the defendants, suspended upon payment of $600,000 because of their alleged inability to pay the full amount. The full judgment may become due if they are found to have misrepresented their finances.

Under the proposed order, defendants must notify customers that they can rescind their merchant-processing agreements without an early termination fee or other penalty during a 60-day period. The order also bars misrepresentations about costs, savings, cancellation terms, negative-option features and other material facts, as well as unsubstantiated savings and earnings claims. Defendants must clearly disclose material transaction terms before collecting billing information, obtain express informed consent for negative-option billing, and provide a simple cancellation method. The FTC authorized the complaint and stipulated final order by a 2-0 vote; the case was filed in the U.S. District Court for the Western District of Washington. The order will have the force of law once approved and signed by the court.