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FOR IMMEDIATE RELEASE
April 13, 2007
McKenna Announces Lawsuit Against Oregon-Based Seller of Credit Processing Services

SEATTLE – Washington State Attorney General Rob McKenna today announced a lawsuit against Merchant Processing, Inc. (MPI), of Beaverton, Ore., and several of its associates. The suit alleges the defendants used deceptive tactics to sell credit and debit card processing services to small businesses in Washington state.

The Attorney General’s Office filed its complaint today in King County Superior Court, alleging violations of the state’s Consumer Protection Act by MPI and two affiliated companies in Oregon: Vequity Financial Group, of Beaverton, and Direct Merchant Processing, of Tigard. MPI’s president Aaron Rian and vice president Michael DeGroat are also defendants.

“We allege Merchant Processing deceived small businesses in Washington by promising those merchants would save money and receive payments faster by switching from their current card processor to MPI,” McKenna said. “In fact, businesses paid higher fees, did not receive funds from bank card transactions in the time promised, and were unable to terminate equipment leases without substantial penalties.”

The Federal Trade Commission also filed suit this week against MPI and company associates. The FTC filed its complaint under seal on April 11 in Federal District Court in Oregon, alleging violations of the Federal Trade Commission Act. At the agency’s request, the court issued a temporary restraining order freezing the assets of MPI, Vequity Financial Group, Direct Merchant Processing and Rian. The court also appointed a receiver temporarily to take control of the business and ordered a temporary halt to business practices the FTC alleges are deceptive.

The Washington Attorney General’s Consumer Protection Division launched its investigation into MPI’s practices in October 2005, and provided information to assist the FTC with its case.

“We’re appreciative that the Federal Trade Commission was able to receive a temporary restraining order that freezes assets our agencies believe should be used to refund small businesses that lost money as a result of MPI’s deceptive marketing practices,” said Senior Counsel Shannon Smith, who led Washington’s investigation.

MPI has sold credit card processing services to Washington small businesses since about 2002.
Washington’s suit alleges that MPI and its associates, either directly or through their sales agents, promised they would save customers money by offering lower rates than a merchant’s current credit card processing service. They also said that they would buy out the merchant’s existing equipment lease.

The state’s suit alleges that many merchants discovered that MPI and its associates charge more for services, and that businesses did not actually need to purchase new equipment. Moreover, MPI did not buy out the businesses’ previous equipment leases, resulting in merchants receiving bills for equipment they no longer used.  The state also claims the defendants told merchants they would receive funds from bank card transactions within 24 hours, but merchants did not receive funds for two or three days.

The FTC’s complaint alleges MPI made similar promises to businesses across the nation and told merchants that the credit card swipe equipment they are currently using is outdated or incompatible with their systems, or that the merchants will need to replace their systems in order to receive the special low rate. Merchants often ended up paying on two leases. To cancel the new, more expensive processing service, the merchants must pay a substantial, previously undisclosed cancellation fee. The FTC charged the defendants with failing to disclose fees and concealing pages of fine print from the merchants until after they signed contracts.

Both the FTC and the Washington State Attorney General are asking the court to order the defendants to stop the deceptive business practices and that MPI and its associates provide refunds to affected businesses. Washington’s suit also requests civil penalties of up to $2,000 per each violation of the state’s Consumer Protection Act.

Additional Materials:

Merchant Processing, Inc., Complaint

The FTC’s complaint is available online at www.ftc.gov

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Media Contacts: Kristin Alexander, Public Information Officer, 206-464-6432

Shannon Smith, Senior Counsel, 206-389-3996

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