Paddle Pays $5m to Settle Tech Support Scam Allegations

Paddle will pay the FTC $5m to settle allegations that it processed payments for tech support scammers.

The UK-based payments firm will also be permanently banned from processing payments for tech support telemarketers, according to the settlement.

The FTC alleged that Paddle had violated the FTC Act, the Telemarketing Sales Rule and the Restore Online Shoppers’ Confidence Act. 

In March last year, one client – Restoro-Reimage – paid $26m to the regulator to settle allegations it used fake AV and popups impersonating popular tech brands like Microsoft in its telemarketing campaigns.

The FTC claimed that Paddle not only facilitated schemes like these, but also:

• Opened merchant accounts claiming to be a “merchant of record” or software “reseller,” and then used these to process card payments for unrelated third-party merchants
• Enabled overseas entities to collect credit card payments from US consumers while evading detection by banks and card networks
• Charged consumers for automatically renewing subscriptions without clearly disclosing the recurring charges

Read more on tech support scams: Google Deploys On-Device AI to Thwart Scams on Chrome and Android

The settlement order will require Paddle to cease processing payments for tech support telemarketers, and to stop helping them to avoid banking risk monitoring programs. It will also demand that the firm deploy client screening and monitoring, and regularly issue reports to payment service providers about its merchants’ transactions.

It must also disclose the terms of any subscriptions to consumers, obtaining informed consent about recurring charges and allowing them to easily cancel.

“Paddle provided foreign-based tech support schemes with access to the US payment system, allowing these companies to harm consumers,” said Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection.

“The FTC will hold accountable payment companies that knowingly facilitate payments for scammers or look the other way when faced with red flags about their clients’ conduct.”

Paddle Responds

Paddle released a lengthy statement in response, confirming that it has for years banned certain categories of tech-support companies. The FTC agreement merely confirms that it will continue the policy, it claimed.

“Over five years ago, Paddle onboarded two companies that the FTC alleges then participated in deceptive telemarketing upsell practices outside of Paddle. We find their alleged behaviour and its impact on consumers abhorrent,” the firm said.

“The FTC acknowledged that Paddle did not process any payments for deceptive telemarketing practices. We do not wish to profit from our association with these two companies, and so the settlement includes an amount of $5m to reflect that.”

Paddle CEO, Jimmy Fitzgerald, added that the firm serves over 6000 digital product companies whose technology “brings incredible value to consumers all around the world.”

He added: “Whilst we believe that almost all digital product companies are ‘forces for good,’ it is sadly a reality that there are some bad faith actors out there.”

Microsoft warned earlier this year that AI tools are helping tech support scammers improve their ROI – highlighting voice phishing campaigns from the Storm-1811 group which help to convince victims to provide scammers with Quick Assist access to their machines.

AI tools are used to find and organize information on potential victims, which is then arranged into “credible lures,” the tech giant said.

A 2023 report from Norton claimed that 75% of desktop threats are now scams, including those where fraudsters pose as tech support agents.