FTC signals crackdown on payment processors closing merchant accounts
The U.S. Federal Trade Commission has issued warnings to major payment firms, signaling that arbitrary account terminations may violate federal trade regulations.
The Federal Trade Commission (FTC) has sent formal warnings to the CEOs of Stripe, PayPal, Visa, and Mastercard regarding the practice of terminating merchant accounts. FTC Chair Andrew N. Ferguson stated that denying access to the financial system without clear, fair guidelines may violate Section 5 of the FTC Act, which prohibits unfair or deceptive practices.
These warnings mark a significant shift in federal oversight, as the agency now claims the authority to investigate the internal risk-assessment algorithms that govern these decisions. Consequences for non-compliance could include multi-year monitoring, heavy fines, and requirements for consumer restitution.
Industry experts note that this regulatory scrutiny forces payment aggregators to reconsider their automated risk-filtering processes. Merchants are advised to mitigate systemic risk by establishing redundancy through multiple merchant accounts, preventing a single point of failure in their payment infrastructure.