FTC Files Detail Chargeback Screening Rules in Nuvei and Humboldt Settlements

Two Federal Trade Commission actions this month turned chargeback data into an enforceable standard for merchant approval. The agency's complaint against Humboldt Merchant Services alleges the processor facilitated payments for over 1,000 shell entities acting as fronts for fraudulent companies. The FTC's press release confirms these sham merchants generated chargebacks at rates "almost 10 times higher than what credit card brands view as excessive." This detail is the core of the case: it establishes that the volume of disputed transactions was so extreme that the processor's existing risk controls failed to catch it.

The settlements carry a combined $16.85 million in consumer redress, with Nuvei owing $4.85 million and Humboldt paying $12 million. Beyond the monetary penalty, the FTC's order against Nuvei dictates a new underwriting process. Processors must now collect five months of chargeback data and six months of processing statements for enhanced screening clients. Nuvei is also required to investigate any client that exceeds a 1% monthly chargeback rate and 75 chargebacks in two of the preceding six months. This moves the focus from a single point-in-time check to continuous monitoring of the merchant relationship.

Humboldt has stated the conduct occurred primarily from 2021 through 2023 under former leadership. The company made no admission of wrongdoing. The FTC's complaint against Nuvei alleges it processed payments for scammers, including tech support fraud targeting U.S. consumers. These specific allegations define the risk the agency is trying to police. The settlement terms create a precedent where chargeback history becomes a primary factor in whether a merchant gains access to card acceptance networks.

The 1,000 shell merchants and their associated chargeback rates illustrate the scale of the risk. The $16.85 million payout represents the direct financial penalty for allowing this activity. The screening thresholds now required of Nuvei set a specific benchmark for how other processors must evaluate merchant risk. If other processors continue to approve merchants based solely on business formation documents, the FTC has signaled that such practices are subject to enforcement. The chargeback rate thresholds in the Nuvei order provide the specific metric the agency will use to measure future compliance.