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A federal judge has ordered online payment processor Qchex to cease its current method of online payment processing, which U.S. regulators say facilitated fraud.

Qchex let people create and send checks drawn on any bank account without verifying their authority to do so, the Federal Trade Commission said in a statement Monday. The San Diego-based company's business focused on generating electronic checks online that could be e-mailed and then printed out by the recipient.

"As a result, con artists have used the Qchex service to draw checks on bank accounts that belong to others," the FTC said, adding that it has received hundreds of consumer complaints about the company.

The agency sued Qchex in U.S. District Court for the Southern District of California on Sept. 19, alleging that the company's practices violate federal law and seeking a an order halting the company's operations. Qchex agreed to a temporary restraining order on Sept. 22.

The Qchex Web site (Qchex.com) was inaccessible on Monday afternoon. Earlier Monday, the company stated on its Web site that its service was suspended until further notice "due to maintenance." The company did not immediately return a phone call seeking comment.

Scammers used Qchex to pay individuals or businesses for goods or services. The checks would initially clear, but ultimately be canceled by the legitimate account holder. By then, the goods or services would have already been delivered, leaving the seller with a loss, the FTC said.

The current court order is temporary, but the FTC will seek a permanent halt to the business practices and an order requiring that the defendants give up their ill-gotten gains, it said.

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and how long did they get away with this??
no checks eh? [pun intended!]
Posted by baswwe (299 comments )
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And the difference from PayPal is????
Lets see, PayPal allows theives to set up accounts with valid or stolen credit cards, send payment to sellers, then do an illegal chargeback on the credit card, keeping the merchandise AND money from the seller.

PayPal is next... Operating like a bank but without bank protections! PayPal is seller UNFAIR. Check NoPayPal or PayPalWarning (dot com) sites for proof!
Posted by Anon-Y-mous (124 comments )
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Big Difference
You have to do a lot more to commit fraud through Paypal. The ONLY thing that Paypal doesn't do, that a bank does to open an account is a credit check. Qchex would let anyone with an email address and valid account numbers cut checks.

I agree they have some draconian terms, but I have used them for almost 5 years with no issues.
Posted by adlyb1 (123 comments )
Link Flag
So the difference is?
So what exactly is the difference between Paypal and Visa or Amex? Actually as a seller I prefer Paypal's dispute resolution to Visa or Amex atleast it gives me a real chance at preventing a chargeback, also fraud prevention is much easier with them.
Posted by pmfjoe (196 comments )
Link Flag
Notable difference
For bank accounts linked to Paypal, you must prove you have access to the account. When you sign up, they deposit two or three small amounts say, $0.27 and $0.33 into your account, and you must enter in the amounts in the correct order before they will accept that you own the account.

For credit cards, they are no different than the swipe machine at most stores, or the processing computer for many online businesses; the charges incurred are between the cc owner and the cc company (most of which have some sort of fraud prevention system).

However, as the article reads, qchex just charges the account with no verification whatsoever, so even if you mistyped the account (and happened to get a valid account number), you would get the money, essentially allowing full and unmittigated fruad.
Posted by hawkeyeaz1 (569 comments )
Link Flag
So unsafe to send checks through email!
Well one form of security they definitely could have used is email anti-theft software. Here's an article in the Seattle Times that mentions one:
<a class="jive-link-external" href="http://seattletimes.nwsource.com/html/personaltechnology/2003209737_ptinbo19.html" target="_newWindow">http://seattletimes.nwsource.com/html/personaltechnology/2003209737_ptinbo19.html</a>'

It seems like Qchex has more than just one hole that is accessible by identity theives but emailing checks is like throwing your doors wide open, asking scammers to use your money.
Posted by mveronica (40 comments )
Reply Link Flag
would you send someone a blank check through post mail?
Hopefully you wouldn't. But that's essential what Qchex is doing. Maybe Qchex should have looking into using some for email anti-theft software. Email is one of the unsafest mediums to use when it comes to sending personal information, let alone checks! It's like asking identity theives to steal your money. And if it's a digital check, it's even easier to alter or change if need be.

Here's an article about one email anti-theft software that could have been used to keep scammers from intercepting email and accessing the checks:
<a class="jive-link-external" href="http://seattletimes.nwsource.com/html/personaltechnology/2003209737_ptinbo19.html" target="_newWindow">http://seattletimes.nwsource.com/html/personaltechnology/2003209737_ptinbo19.html</a>
Posted by mveronica (40 comments )
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