A company that operated a Web site that created and delivered unverified checks at the direction of users violated the unfair practices provisions of the Federal Trade Commission Act, the U.S. Court of Appeals for the Ninth Circuit ruled. The appeals court noted that evidence showed that the service was extensively used by "unscrupulous opportunists" to create and send fraudulent checks drawn on the bank accounts of numerous victims. The court rejected the company's argument that it had not "caused" injury to consumers within the meaning of the Act because it did not "obtain, input or direct" the delivery of the consumer information used to effectuate the creation of the fraudulent checks. The court found that the company "created and controlled a system that facilitated fraud and that the company was on notice as to the high fraud rate" and continued to create and deliver checks without proper verification.
Federal Trade Commission v. Neovi, inc., 2010 U.S. App. LEXIS 9888 (9th Cir. May 14, 2010) Download PDF