A.G. Schneiderman Announces Settlement With Firm That Processed Payments For Fraudulent Id Theft Protection Company

BUFFALO – Attorney General Eric T. Schneiderman today announced that his office has reached a settlement of $71,640 with New Beginnings NY, Inc., a payment processor located in Cheektowaga, and its owner, Kenneth Newton, to provide restitution to customers paid for and never received identity theft protection from Phoenix Trust. New Beginnings NY, Inc. had served as Phoenix Trust’s payment processor. A payment processor is an entity that, for a fee, processes, verifies, and accepts or declines credit card transactions on behalf of a business when customers pay for a service or product online or over the telephone.

“Mr. Newton allowed scam artists to prey upon innocent consumers who were, in fact, trying to ensure their financial security, violating their trust and taking their hard-earned money,” Attorney General Schneiderman said. “This settlement sends the clear message that businesses that process payments for scam artists will be held accountable.”

Newton operated New Beginnings as a payment processing company, electronically withdrawing funds from bank accounts and depositing them into another account as payment for a service or product. According to Newton, he provided payment services to a company called Phoenix Trust from June 26, 2013, to July 11, 2013. Newton stated that it was his understanding that Phoenix Trust was selling identity theft protection for $398 to consumers.

According to Newton, Phoenix Trust would give him a spreadsheet with the names and bank routing numbers of consumers that it said it sold the kits to.  Newton would then create a physical check for $398 with the consumer’s bank account information on it and deposit the checks in his account, then transmit payment to Phoenix Trust after taking a commission. However, in reality, Phoenix Trust failed to provide identity theft protection, and consumers received nothing in return for the $398 deducted from their accounts.

As a result of the settlement, Newton is required to pay $71,640, which will provide complete restitution to defrauded consumers.  Newton is also required to shut down his payment processing company as well as  a company called Ironwood Management Group, which collected on consumer debt.

In light of a recent cyberattacks and security breaches, Attorney General Schneiderman offers the following tips to consumers who suspect they’ve been a victim:

If you might be a victim:

• Report to any of the three credit reporting agencies (Equifax, Transunion or Experian) that you may have been a victim of identity theft. Make sure the credit reporting agency has your current contact information so it can get in contact with you.
• Ask the credit reporting agencies to put a fraud alert on your credit file.  This will still allow you to use your credit card. If you put a fraud alert on your file, you may ask for a free credit report from each of the credit reporting agencies. Contacting any one of the three credit reporting agencies above is enough to file a credit alert with all of them. A credit alert must be renewed every 90 days.
• You also have a right to put a credit freeze on your credit file. This will block someone from obtaining credit using your name or personal information. This means you won’t be able to apply for any new credit cards or loans while the freeze is in effect, but you can continue to use your existing cards. To freeze your credit file, you must notify each of the three major credit bureaus. You can remove the freeze temporarily or permanently by contacting each of the three agencies. There is no fee if you have been the victim of identity theft. You may be charged a fee of up to $5  if you have not been a victim of identity theft.
• You should also check your credit activity regularly with each credit issuer.  You don’t need to wait for your monthly statement, though you should check that as well.  Many banks provide online information to account holders about recent activity.  

If you are a victim:

• Create an identity theft fraud report.  To create one, file a complaint with the Federal Trade Commission and print your Identity Theft Affidavit. You can call the FTC at 1-877-438-4338 or visit this website.
• Use that to file a police report and create your Identity Theft Report.
• An Identity Theft Report will help you deal with credit reporting companies, debt collectors and any fraudulent accounts that the ID thief opened in your name.
• Put a freeze (not just a fraud alert) on your credit report by notifying each of the credit reporting agencies (Equifax, TransUnion or Experian). The freeze can be removed only by you.  
• Get your credit report from each of the three agencies. You are entitled to free reports once you post a fraud alert or put a freeze on your account. Read the reports carefully to see whether other fraudulent transactions or accounts are listed, and then take steps to correct the errors.
• Check your credit card account frequently to look for any irregular activity.

Contact information for the credit reporting agencies:

Equifax
1-800-525-6285

Experian
1-888-397-3742

TransUnion
1-800-680-7289

This case was handled by Assistant Attorney General James Morrissey, Senior Consumer Fraud Representative Karen Davis, Assistant Attorney General In-Charge Michael Russo and Executive Deputy Attorney General for Regional Offices Marty Mack.