Update: FTC & WA AG Allege Deceptive Practices of Sphyra, Formerly Merchant Services Direct, LLC
SPOKANE, WA - Merchant Services Direct (MSD), LLC (dba Sphyra, Inc.), a local credit card processing company, is under fire today as Washington Attorney General and the Federal Trade Commission both filed against them for deceiving thousands of business owners across the country.
The Federal Trade Commission has worked closely with BBB and the Attorney General’s Office to determine MSD collected millions in profit by not disclosing fees and rates accurately to small business owners signing up for their services. The complaint also states MSD was falsely telling customers they needed to upgrade or update their equipment to comply with federal requirements.
MSD is owned by Kyle Dove and Shane Hurley. The company is based in Spokane Valley, WA and operates in six other states: Arizona, Florida, Colorado, California, Texas and Ohio.
MSD currently holds an “F” rating with Better Business Bureau with 76 complaints in the past three years. BBB also reports an advertising review conducted against MSD earlier this year, which determined they claim significantly higher savings than they could substantiate. Even after BBB’s requests to modify these advertisements, MSD filed to do so.
“Unethical businesses, especially those deceptively harming other small businesses, will not be tolerated in our community. Merchant Services Direct’s unethical practices are exactly why BBB exists. Our investigations focus on maintaining a self-regulated marketplace, which in turn helps protect consumers, and businesses. I'm proud that we were able to assist the FTC and Attorney General,” said Kris Byrum, BBB investigator.
In the complaint filed today, the Attorney General’s Office alleges MSD misrepresented the following:
they claim to be associated with the business’s current card processing company and are ‘updating’ current services;
their processing rates are significantly lower than the business’s current card processing company;
the business will experience savings over its current card processing company; and
the business’s current card processing equipment is outdated and that new, expensive leases are necessary.
In consumer complaints filed with BBB, they claim that once they signed a contract with MSD, they discovered MSD’s sales agents weren’t affiliated with their current payment processor. They also found their new processing rates were much higher than represented (often more than their previous provider), undisclosed fees were being taken out of their account, and they have to pay an undisclosed $300-400 fee to cancel processing services.
The Attorney General’s Office is filing in Washington State for injunctive and other relief under the Consumer Protection Act and will seek full reimbursement for costs and fees and restitution for businesses.
The Federal Trade Commission is filing in federal court alleging violations of federal law and has sought a court order freezing MSD’s assets.
For more than 100 years, Better Business Bureau has been helping consumers find businesses, brands and charities they can trust. In 2012, consumers turned to BBB 124 million times for Business Reviews on more than 4.5 million companies and Charity Reports on 11,000 charities, all available for free at bbb.org. The Better Business Bureau of Eastern Washington, North Idaho and Montana, founded in 1929 serves consumers and businesses across three state lines including nearly 2,500 BBB Accredited Businesses.