In a recent move to enforce consumer protection standards in the US financial services sector, the Federal Trade Commission (FTC) has petitioned a federal court to declare a payment processing company and its top executives in contempt of court. The action targets Cliq, Inc., previously known as Cardflex, Inc., along with its Chief Executive Officer Andrew Phillips and Chief Technology and Security Officer John Blaugrund.
This stems from allegations of widespread non-compliance with a 2015 court order designed to curb fraudulent activities in payment processing.
The backstory traces to a major FTC lawsuit settled in 2015, which accused the company of facilitating illegal credit card transactions linked to the notorious I Works scheme.
That operation was infamous for deceptive marketing tactics that tricked consumers into unwanted subscriptions and charges. As part of the settlement, the court imposed strict obligations on Cliq and its leaders to implement robust measures for detecting and preventing fraud.
These included thorough vetting of clients and ongoing monitoring to ensure no deceptive practices slipped through.
However, according to the FTC’s recent filing, Cliq has systematically ignored these mandates over the years, leading to substantial consumer harm.
The agency claims the company processed hundreds of millions of dollars for clients flagged on Mastercard’s Member Alert to Control High-risk (MATCH) list.
This registry highlights merchants previously terminated for issues like excessive chargebacks—situations where customers dispute transactions due to non-delivery of goods, misrepresentation, or outright fraud.
By continuing to handle payments for these risky entities, Cliq allegedly enabled ongoing deceptive schemes.
Further violations detailed in the motion include aiding clients in dodging fraud detection systems operated by banks and credit card networks.
The FTC asserts that Cliq failed to perform adequate due diligence on high-risk merchants, neglecting to scrutinize their business models for signs of deceit.
Additionally, the company reportedly did not properly oversee transactional patterns, such as ignoring elevated chargeback rates unless it could confirm no deception was involved—a threshold it seldom met.
These lapses, the FTC argues, represent a blatant disregard for the 2015 order’s core requirements.
In response, the FTC is pushing for stringent penalties to rectify the damage and deter future infractions.
The agency is requesting at least $52.9 million in financial compensation to reimburse affected consumers.
Beyond monetary relief, it seeks a lifetime prohibition on Phillips and Blaugrund from engaging in any payment processing activities.
To oversee compliance, the FTC also proposes appointing an independent receiver to monitor Cliq’s operations and ensure adherence to court directives.
The motion was submitted to the U.S. District Court for the District of Nevada, the same jurisdiction that handled the original case.
Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, emphasized the agency’s resolve in a statement:
“This company and its leaders have brazenly flouted an FTC order meant to safeguard against fraud. We’re committed to pursuing accountability for those who overlook warning signs and undermine the integrity of our payment ecosystem.”
This development underscores broader challenges in the fintech industry, where digital transactions can amplify risks if oversight falters.
Consumer advocates have long called for tougher enforcement against payment facilitators that prioritize profits over protection.
As the court deliberates, the case could set a precedent for how regulators address repeat offenders in an era of evolving online commerce threats.
With potential ripple effects on similar firms, it highlights the FTC’s ongoing vigilance in maintaining fair practices amid growing concerns over financial scams.