Court puts stop on online check firm

Qchex agrees to halt current method of payment processing after FTC finds it facilitated check fraud.

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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