Humboldt Merchant Services processed card payments for more than 1,000 shell companies that served as fronts for fraud, and placed them on lower-risk bank identification numbers so their transactions would clear, the Federal Trade Commission alleges. The agency announced the action on September 8, together with a proposed order that would settle the case. Humboldt has not been found liable, and the order does not take effect unless a federal court approves it.
Red flags the FTC says went unanswered
“Humboldt was processing payments for companies despite red flags indicating they were scamming consumers,” said Katherine White, Deputy Director of the FTC’s Bureau of Consumer Protection, in the agency’s announcement. The complaint alleges that the payment processor knew, or deliberately ignored, signs that its merchants were running unauthorized billing schemes.
One of those signs, the FTC says, was the chargeback rate. The accounts it describes as sham experienced chargebacks, which occur when a cardholder disputes a charge with the card issuer, at about ten times the rate considered normal for the industry. The complaint presents that gap as a warning that a processor in Humboldt’s position would be expected to act on.
The bank identification number allegation
The FTC alleges that Humboldt put the accounts of those fraudulent merchants on lower-risk bank identification numbers, known as BINs, to improve the share of transactions that were approved. In the agency’s telling, the placement was a way to dodge the fraud checks that the high chargeback rates would otherwise have triggered.
The release also ties Humboldt to a specific scheme. The FTC alleges the processor assisted Legion Media, an unauthorized billing operation the agency shut down in 2024. The release names no individual defendants, only the company.
What the proposed order would require
The settlement is a proposed stipulated order filed in the U.S. District Court for the Eastern District of Michigan, approved by a 2-0 Commission vote. According to the FTC’s summary, it would require Humboldt to pay $12 million in consumer redress and would permanently bar it from processing payments for several categories of merchant.
The bar would cover shell companies, merchants on the Mastercard MATCH list, which flags businesses for excessive chargebacks, fraud or laundering, and merchants that are subject to law enforcement action. It would also cover e-commerce businesses that rely only on third-party mailbox addresses, such as those at UPS stores, unless they have no history of negative option billing.
The proposal goes further on technique. It would prohibit credit card laundering and a tactic the release calls load balancing, and it would ban giving false information in merchant account applications.
Why a processor, and not just the merchants
Card scams depend on someone willing to run the payments. A fraudulent merchant cannot charge a consumer’s card without a processor behind it, and the FTC’s theory is that Humboldt supplied that access to more than 1,000 fronts while the warning signs, including the chargebacks, piled up. That is why the proposed order is written around who Humboldt may serve in the future rather than only what it should pay.
The categories in the ban track the red flags in the complaint. A shell company has no real business behind it, a MATCH-list listing records past trouble with chargebacks, fraud or laundering, and a mailbox address with no billing history gives a processor little to verify. The false-information ban in the proposal closes the other door, since a merchant application that misstates who is applying defeats any screening that follows.
The release places the Legion Media link inside the same pattern. The FTC shut down that unauthorized billing scheme in 2024, and the complaint alleges that Humboldt helped it, which the agency presents as an example of the conduct rather than a separate case.
Allegations, not findings
Every description above is the FTC’s allegation. The release does not record Humboldt admitting any of it, and a proposed order of this kind is an agreement the court must still enter before it binds the company. The $12 million is a term of the proposal, not a payment already made.
The case sits in the part of consumer protection that rarely reaches the public: the companies that move the money rather than the ones that make the pitch. The allegation, if the court enters the order, is that a payments company that sees a merchant’s chargebacks climb is expected to stop processing rather than reclassify the account.
The FTC’s press release is the controlling source for the merchant count, the chargeback comparison, the order terms and the Michigan court filing, and the filed order is where any later change to those terms would appear.
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AI assistance was used to draft this report; every claim was checked against the Federal Trade Commission complaint and proposed order linked above.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
