A U.S. judge has shut down Qchex, an online check-creating service, after the U.S. Federal Trade Commission (FTC) complained the company creates and sends checks without verifying the customer has authority to write checks on the account being used.
Qchex, part of Neovi, has agreed to a temporary restraining order halting what the FTC called its “unfair business practices,” the FTC announced Monday. The FTC has asked the U.S. District Court for the Southern District of California to permanently shut down Qchex’s operations and to force Qchex to return profits from its service.
Judge William Hayes approved the temporary restraining order Sept. 22.
Con artists have used Qchex’s service to gain unauthorized access to bank accounts, the FTC said, and businesses that have received “fraudulent” Qchex checks have also become victims.
A call to Qchex’s customer service number led to a voice mail telling customers their concerns were be addressed in 24 to 48 hours. Qchex did not immediately return a phone call seeking comment on the FTC court case.
The Qchex service is suspended until further notice “due to maintenance,” according to a note on Qchex.com.
Before September 2005, Qchex offered and sold its online check services without making “any effort at all” to verify that customers had authorized access to the bank accounts they were using, the FTC said in a press release.
Qchex would create and deliver checks for a customer even when the customer’s name was different from the name on the checking account and different from the name on the credit-card account the customer used to pay for the check service, the FTC said. In September 2005, Qchex implemented—then subsequently abandoned—a series of verification plans that the FTC called haphazard and ineffective.
Some account holders whose accounts were debited without their authorization tried to contact Qchex to tell the company it was processing checks on the wrong account, but they could not locate a working phone number for Qchex, the FTC said. In some cases where account holders did reach Qchex, the company ignored them and continued to create and deliver checks on their accounts, it added.
The FTC has received hundreds of consumer complaints about the company, the agency said.
Scammers also used Qchex checks in overpayment schemes, in which the scammer overpaid an unsuspecting third party for items or services and asked that third party to wire back the difference between the price of the item or service and the amount of the bogus Qchex check, the FTC said. The checks initially cleared, so these recipients of Qchex checks wired the excess funds as requested. When an unauthorized check ultimately bounced, the amount of the previously deposited Qchex check was debited from the victim’s account.
The defendants’ conduct constitutes unfair practices that violate the FTC Act, the FTC said.
Defendants named in this case are Neovi, doing business as Neovi Data and Qchex.com; G7 Productivity Systems, doing business as Qchex.com; and their principal owners, James M. Danforth and Thomas Villwock. The defendants are based in San Diego.
-Grant Gross, IDG News Service (Washington Bureau)
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