Heated discussion is underway between the Payment Processing World and Bank Regulators. The headlines are focusing on the pros and cons of payday lending. The underlying theme really has more to do with the broader responsibility of acquirers to manage the risk that threatens their own financial stability.
Lack of due diligence when doing business with Third Party Payment Processors and their merchants has long resulted in bank losses and failures as well as the dismissal of unwary risk managers.
In less than ten years the merchant processing industry has diluted underwriting standards of the past in favor of boarding known high risk merchant categories. Further, recent federal court filings reveal intentional disregard of the fraud warnings signaled by high chargeback and return rates.
Merchant underwriting has always involved the evaluation of the service or product being sold. If nothing of value is received by the cardholder, chargebacks are inevitable. There is nothing new here.
Likewise, there have always been TPP s who have specialized in merchants who are clearly defrauding consumers. One only has to look at the known no value products for weight loss, cancer cures, debt relief, government grants, travel certificates, discount buyers clubs, wealth building courses, and credit card protection to realize some of the merchant types that might trigger an FTC or CFPB action.
Speaking of credit card protection, see http://www.consumerfinance.gov/newsroom/cfpb-orders-bank-of-america-to-pay-727-million-in-consumer-relief-for-illegal-credit-card-practices/