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Federal Trade Commission v. The Western Union Co.

United States District Court, M.D. Pennsylvania

January 20, 2017

FEDERAL TRADE COMMISSION, Plaintiff,
v.
THE WESTERN UNION COMPANY, a corporation, also doing business as Western Union Financial Services, Inc., and through other subsidiaries and affiliates, Defendant.

          PLAINTIFF FEDERAL TRADE COMMISSION KAREN D. DODGE, JOANNIE T. WEI, ELIZABETH C. SCOTT Attorneys for Plaintiff.

          DEFENDANT THE WESTERN UNION COMPANY JOHN R. DYE.

          COUNSEL FOR DEFENDANT THE WESTERN UNION COMPANY EDWARD B. SCHWARTZ, Steptoe & Johnson LLP Attorneys for Defendant.

          SEAN M. BERKOWITZ Latham & Watkins LLP Attorneys for Defendant.

          STIPULATED ORDER FOR PERMANENT INJUNCTION AND FINAL JUDGMENT

         Plaintiff, the Federal Trade Commission ("Commission" or "FTC"), filed its Complaint for Permanent Injunctive and Other Equitable Relief ("Complaint"), pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. §§ 6101-6108. The Commission and Defendant The Western Union Company ("Western Union") stipulate to the entry of this Stipulated Order for Permanent Injunction and Final Judgment ("Order") to resolve all matters in dispute in this action between them.

         THEREFORE, IT IS ORDERED as follows:

         FINDINGS

         1. This Court has jurisdiction over this matter, 2. The Complaint charges Defendant with engaging in deceptive and unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, the Telemarketing Act, 15 U.S.C. §§ 6101-6108, and the Telemarketing Sales Rule ("TSR"), 16 C.F.R. Part 310, in the course of providing money transfer services through its worldwide money transfer network.

         3. Defendant neither admits nor denies any of the allegations in the Complaint, except as specifically stated in this Order. Only for purposes of this action, Defendant admits the facts necessary to establish jurisdiction.

         4. Defendant waives any claim that it may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date of this Order, and agrees to bear its own costs and attorney fees.

         5. Defendant and the Commission waive all rights to appeal or otherwise challenge or contest the validity of this Order.

         DEFINITIONS

         For purposes of this Order, the following definitions apply:

         A. "Cash-to-cash money transfer" means the transfer of the value of cash from one person in one location to a recipient (payee) in another location that is received in the form of cash.

         B. "Cash reload money transfer" means the transfer of the value of cash from one person in one location to a recipient (payee) in another location that is received in a form that makes it possible for a person to convert the cash into an electronic form that can be used to add funds to a general-use prepaid card or an account with a payment intermediary.

         C. "Consumer" means any person, worldwide, who initiates or sends a money transfer.

         D. "Defendant" means The Western Union Company, also doing business as Western Union Financial Services, Inc., and through its other subsidiaries and affiliates, and its successors and assigns.

         E. "Elevated fraud countries" means any country in which the principal amount of money transfers that are the subject of fraud complaints, received by Defendant from any source, represents one (1) percent or more of the principal amount of fraud complaints worldwide received by Defendant, for either money transfers sent or received in that country, determined on a quarterly basis, provided that once a country is determined to be one of the elevated fraud countries, it shall continue to be treated as such for purposes of this Order.

         F. "Elevated fraud risk agent location" means any Western Union agent location that has processed payouts of money transfers associated with:

1. Five (5) or more fraud complaints for such agent location, received by Defendant from any source, during the previous sixty (60) day period, based on a review of complaints on a monthly basis; and fraud complaints, received by Defendant from any source, totaling five (5) percent or more of the total payouts for such agent location in numbers or dollars in a sixty (60) day period, calculated on a monthly basis; or
2. Fifteen (15) or more fraud complaints for such agent location, received by Defendant from any source, during the previous sixty (60) day period, based on a review of complaints on a monthly basis.

         G. "Fraud-induced money transfer" includes any money transfer that was induced by, initiated, or sent as a result of, unfair or deceptive acts or practices and/or deceptive or abusive telemarketing acts or practices.

         H. "Front line associate" means the employee of the Western Union agent responsible for handling a transaction at the point of sale for a consumer or a recipient (payee) of a money transfer, including by initiating, sending, or paying out the money transfer.

         I. "Money transfer" means the sending of money (in cash or any other form. unless otherwise stated) between a consumer in one location to a recipient (payee) in another location using Defendant's money transfer service, and shall include transfers initiated or sent in person, online, over the telephone, using a mobile app, or through whatever platform or means made available. The term "money transfer" does not include Defendant's bill or loan payment services, or purchases of foreign currency conversions or options contracts from Defendant.

         J. "Person" includes a natural person, an organization or other legal entity, including a corporation, partnership, sole proprietorship, limited liability company, association, cooperative, or any other group or combination acting as an entity.

         K. "Seller" means any person who, in connection with a telemarketing transaction, provides, offers to provide, or arranges for others to provide goods or services in exchange for consideration.

         L. "Telemarketer" means any person who, in connection with telemarketing, initiates or receives telephone calls to or from a customer.

         M. "Telemarketing" means any plan, program, or campaign which is conducted to induce the purchase of goods or services by use of one or more telephones, and which involves a telephone call, whether or not covered by the TSR.

         N. "Western Union agent" means any network agent, master agent, representative, authorized delegate, independent agent, super-agent, national account agent, key account agent, strategic account agent, sub-representative, subagent, or any location, worldwide, authorized by Defendant to offer or provide any of its money transfer products or services.

         I. PROHIBITED BUSINESS ACTIVITIES

         IT IS FURTHER ORDERED that Defendant, Defendant's officers, agents, and employees, and all other persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with promoting, offering for sale, or providing money transfer services, are permanently restrained and enjoined from:

         A. Transmitting a money transfer that Defendant knows or reasonably should know is a fraud-induced money transfer, or paying out a money transfer to any person that Defendant knows or reasonably should know is using its system to obtain funds from a consumer, directly or indirectly, as a result of fraud;

         B. Providing substantial assistance or support to any seller or telemarketer that Defendant knows or reasonably should know is accepting from a U.S. consumer, directly or indirectly, a money transfer as payment for goods or services offered or sold through telemarketing;

         C. Failing to do any of the following in connection with money transfers initiated by consumers:

         1. Interdict recipients that have been the subject of any complaints about fraud-induced money transfers based on information provided to, or that becomes known by, Defendant;

         2. Identify, prevent, and stop cash-to-cash money transfers and cash reload money transfers initiated or received in the U.S. from being used as a form of payment by sellers or telemarketers, including, but not limited to, by:

a. Asking all U.S. consumers whether the money transfer is a payment for goods or services offered or sold through telemarketing;
b. Declining to process money transfers from U.S. consumers where the money transfer is a payment for goods or services offered or sold through telemarketing; and
c. Interdicting known sellers and telemarketers accepting money transfers as payments for goods or services offered through telemarketing;

         3. Provide a clear, concise, conspicuous and uncontradicted consumer fraud warning on the front page of all money transfer forms, paper or electronic, utilized by consumers in elevated fraud countries (based on money transfers sent from those countries) to initiate money transfers using Defendant's system that includes, but is not limited to:

a. A list of the most common types of scams that utilize Defendant's money transfer system;
b. A warning that it is illegal for any seller or telemarketer to accept payments from U.S. consumers through money transfers for goods or services offered or sold through telemarketing;
c. A notice to consumers that the money transfer can be paid out to the recipient within a short time, and that after the money is paid out, consumers may not be able to obtain a refund from Defendant, even if the transfer was the result of fraud, except under limited circumstances; and
d. A toll-free or local number and a website for Defendant, subject to the timing requirements set forth in Subsection C.4, that consumers may call or visit to obtain assistance and file a complaint if their money transfer was procured through fraud;

         4. Make available in all countries in which Defendant offers money transfer services a website that consumers may visit to obtain assistance and file a complaint if they claim their money transfer was procured through fraud, provided that websites that are not yet available shall be made available in accordance with the following schedule: (i) for countries determined to be elevated fraud countries, within six (6) months of entry of this Order; and (ii) for all other countries, within two (2) years of entry of this Order.

         5. Provide consumers who initiate or send money transfers via the Internet, telephone, mobile app, or any other platform that is not in-person, with substantially the same clear, concise, conspicuous and uncontradicted fraud warning required by Subsection C.3, provided that the warning may be abbreviated to accommodate the specific characteristics of the media or platform;

         6. Provide the required warning to consumers in the language used on the send form or other media type or platform used for the money transfer, in a form appropriate for the media or platform;

         7. Review and update the consumer warning as necessary to ensure its effectiveness in preventing fraud-induced money transfers; and

         8. Submit modifications to the warning, if any, to the Commission for review no less than ten (10) business days before any modified warning is disseminated to Western Union agents; provided that nothing herein shall prohibit Defendant from changing the nature or form of its service, send forms, or media or platform for offering money transfer services or from seeking to replace its send forms with an electronic form or entry system of some type in the future. In the event such changes are made, Defendant shall provide a consumer fraud warning substantially similar to that outlined in Subsection C.3 in a form appropriate to the media or platform;

         D. Failing to reimburse the principal amount of a consumer's money transfer and any associated transfer fees whenever a consumer or his or her authorized representative reasonably claims that the transfer was fraudulently induced and:

1. The consumer or his or her authorized representative asks Defendant, the sending agent, or front line associates to reverse the transfer before the transferred funds have been picked up; or
2. Defendant, after reviewing information and data relating to the money transfer, determines that Defendant, its agents, or the front line associates failed to comply with any of Defendant's policies and procedures relating to detecting and preventing fraud-induced money transfers when sending or paying out the money transfer by failing to: provide the required consumer fraud warnings; comply with Defendant's interdiction or callback programs; verify the recipient's identification; or accurately record the recipient's identification(s) and other required biographical data;

         E. Failing to promptly provide information to a consumer, or his or her authorized representative, who reports being a victim of fraud to Defendant, about the name of the recipient of the consumer's money transfer and the location where it was paid out, when such information is reasonably requested; and

         F. Failing to establish and implement, and thereafter maintain, a comprehensive anti-fraud program that is reasonably designed to protect consumers by detecting and preventing fraud-induced money transfers worldwide and to avoid installing and doing business with Western Union agents who appear to be involved or complicit in processing fraud-induced money transfers or fail to comply with Defendant's policies and procedures to detect and prevent fraud (hereinafter referred to as "Defendant's Anti-Fraud Program"), Such program, the content and implementation of which must be fully documented in writing, and provided to the FTC, shall contain administrative, technical, and physical safeguards appropriate to Defendant's size and complexity and the nature and scope of Defendant's activities, shall be consistent with this Order's requirements, and shall include at least the following requirements:

1. Performance of due diligence on all prospective Western Union agents and existing Western Union agents whose contracts are up for renewal;
2. Designation of an employee or employees to coordinate and be accountable for Defendant's Anti-Fraud Program;
3. Appropriate and adequate education and training on consumer fraud for Western Union agents and front line associates;
4. Appropriate and adequate monitoring of Western Union agent and front line associate activity relevant to the prevention of fraud-induced money transfers;
5. Prompt disciplinary action against Western Union agent locations where reasonably necessary to prevent fraud-induced money transfers;
6. Adequate systematic controls to detect and prevent fraud-induced money transfers, including, but not limited to:
a. Imposing more stringent identification requirements for money transfers sent to, or paid out in, elevated fraud countries;
b. Holding suspicious money transfers at certain dollar thresholds to elevated fraud countries until Defendant has confirmed with the sender that they are not fraud-induced or has refunded the money to the sender; and
c. Ensuring that Western Union agent locations are recording all required information about recipients required by Defendant's policies or procedures or by law, including, but not limited to, their names, addresses, telephone numbers, ...

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