On June 17, 2025, the Federal Trade Commission announced a settlement with Paddle.com Market Limited and its U.S. subsidiary, resolving allegations that the company facilitated the sale of deceptive tech-support services and violated several consumer protection statutes. The settlement includes a $5 million payment and a permanent ban on Paddle from processing payments for tech-support telemarketers or companies that use pop-ups regarding computer security or performance.
Allegations Against Paddle
Paddle operates as a "merchant of record," providing payment processing and subscription management services for software vendors. According to the FTC, Paddle served as the payment platform for numerous software companies engaged in deceptive telemarketing practices, including Restoro and Reimage. These companies used pop-ups and scare tactics to mislead consumers—particularly older adults—into believing their computers were infected and in need of immediate repair.
The FTC alleged that Paddle processed payments for these services while masking the true identities of the underlying telemarketers, using Paddle's own name on consumers' billing statements. The complaint also alleged that Paddle aggregated payments from multiple vendors under its own merchant account, a practice that reduced transparency for both consumers and financial institutions monitoring for fraud.
Further, Paddle allegedly processed recurring subscription payments without ensuring that consumers had received clear and conspicuous disclosures or provided affirmative express consent. Many consumers reportedly believed they were making a one-time payment but were instead enrolled in automatically renewing subscription plans.
Legal Theories Advanced by the FTC
The FTC's complaint advanced three core theories:
Telemarketing Sales Rule (TSR): The FTC alleged that Paddle assisted and facilitated deceptive telemarketing sales by providing substantial support—namely, payment processing services—with knowledge or reckless disregard of the underlying misconduct. The TSR expressly permits liability for third parties who assist and facilitate violations.
Section 5 of the FTC Act: The agency alleged that Paddle engaged in unfair practices by charging consumers without proper authorization. While Section 5 does not include an "assist and facilitate" provision, the FTC appears to argue that Paddle bore direct liability due to its integral role in handling billing and subscription renewals.
Restore Online Shoppers' Confidence Act (ROSCA): The complaint further alleged that Paddle failed to comply with ROSCA's requirements for recurring online transactions. Specifically, Paddle was accused of failing to provide clear and prominent disclosures of the subscription terms, obtain express informed consent, and offer a simple method for cancellation. As with Section 5, the FTC pursued Paddle as a primary actor rather than a third-party facilitator.
Settlement Terms
The stipulated order imposes several key requirements on Paddle:
- A permanent ban on processing payments for tech-support products or services sold through telemarketing;
- Enhanced merchant oversight, including due diligence reviews, ongoing monitoring, and red-flag response procedures for vendors exhibiting suspicious activity;
- Strict recurring billing compliance, requiring clear pre-purchase disclosures, affirmative express consent, and easy-to-use cancellation mechanisms;
- A $5 million monetary judgment, to be used for consumer redress.
Takeaways for Advertisers and Intermediaries
The Paddle settlement underscores the FTC's continued focus on intermediary liability in cases involving deceptive marketing and billing practices. While the TSR provides an explicit basis for holding third-party processors accountable, the FTC's theories under Section 5 and ROSCA reflect a broader view of direct liability when payment platforms are closely tied to the consumer transaction.
Payment processors, platforms, and other merchant facilitators should ensure they:
- Vet clients for potential compliance risks;
- Review and retain marketing materials used by merchants;
- Monitor chargeback rates, refund patterns, and consumer complaints; and
- Implement robust procedures for recurring billing compliance.
As subscription-based services and third-party commerce platforms continue to expand, companies that play a central role in facilitating these transactions should be prepared to meet heightened expectations from regulators.
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
