Credit card laundering is the misuse of a “merchant account” with a financial institution. A merchant account is a kind of bank account: it is what a seller or telemarketer needs to gain access to a credit card collection and payment system and to get cash for goods and services sold. Obtaining access to the credit card system through another’s merchant account without the authorization of the financial institution is credit card laundering. This practice violates the Rule, and is a criminal offense under federal law and the laws of some states.
Here’s how the system works for companies that make legitimate use of the credit card system: To be able to accept payment from a consumer who wants to charge the price of goods or services to a credit card, a seller or telemarketer must have a “merchant account” with a financial institution that is a member of a credit card system (for example, Visa or MasterCard) that issued the consumer’s credit card. When the consumer pays by credit card, the merchant generates a credit card sales draft. The seller then deposits the draft into the seller’s merchant account, and obtains the cash amount of the deposited draft. The financial institution sends the credit card sales draft through the particular credit card system, which posts a corresponding charge to the consumer’s
credit card account.
In credit card laundering work, sellers and telemarketers who are unable to establish a merchant account with a financial institution
sometimes use the unlawful services of a launderer (also known, inaccurately, as a “factor”). A launderer opens a “back door” into the credit card system by providing access to a merchant account—and the whole credit card collection and payment system—without the authorization of the financial institution or the credit card system. Except as expressly permitted by a credit card system, it is a Rule violation for anyone:
- with a merchant account to deposit into the credit card system any credit card sales draft generated by a telemarketing transaction that is not the result of a sale to the buyer by the person who has the merchant account.
- to use or solicit someone who has a merchant account (or an employee, representative, or agent of someone who has a merchant account) to deposit into the credit card system any credit card sales draft generated by a telemarketing transaction that is not the result of a sale to the buyer by the person who has the merchant account.
- o obtain access to the credit card system through a business relationship or an affiliation with a merchant, when the access is not authorized under the terms of the merchant account or by the applicable credit card system.
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