GPT Insanity: Stormpay Controversy Part Deux

I posted an article earlier about Stormpay and the controversy over their practices. Well StormPay appears to be up to something. To anyone who's a member of 12DailyPro (12DP), a big autosurf program, StormPay has coerced 12DP into removing EMO as a payment option. At this point in time, EMO represents about 25% of 12DP's business. Now, this sets a precedent. StormPay has since issued a statement to this effect on their site. Any Autosurf or HYIP dealing with StormPay can no longer offer an alternative payment processor. Failure to comply means freezing of their accounts. This draws a comparison to the eBay/Paypal situation, in which no alternative online payment processors may be used for their Ebay auctions.

Below is the full text from StormPay:

31-Jan-2006 14:40
Due to high volumes of fraudulent transactions made to merchants with commission based business models, StormPay can no longer process payments for those type of merchants who choose to accept more than one payment processing solution.

Using more than one payment processor is exactly the situation that “fraud” seeks out. This enables the fraudulent user to set up a fake profile with either of the processors, make a purchase or join the program, and then withdraw their earnings to the other processor where the real identity is used. This sort of activity makes it nearly impossible for either processor, or law enforcement to properly handle the fraud because the “trail” comes to an end. This is the cause for a great many chargebacks to those merchants which can be avoided.

As of 1/30/2006 StormPay must require Merchants with a commissioned based business model who choose to accept StormPay, to only accept StormPay. StormPay certainly does not wish to dictate how our merchants run their business, all merchants are free to choose any processing solution that best suits their needs. We understand you have choices and certainly hope that choice is the online leader – StormPay. However, if another payment solution is used, please immediately remove StormPay from the associated website as a funding option and continue to use the StormPay account funds to finish payments to those members who paid using their StormPay account.

At StormPay we truly care about our merchants’ and the overall success of their business and sales and for that reason we have implemented these very necessary changes. Thank you in advance for your understanding in this very crucial matter.

StormPay Inc.

Now, to be fair to StormPay, this isn't necessarily a bad thing. This may lead to fewer fraud cases, perhaps. But then again, many sites offering more than one payment processor DO NOT ALLOW payment from one processor and withdrawal from the other. The contention put forward is that e-currency exchange is where the fraud lies.

The truth be told, is that many autosurfs and HYIPs DO have a ponzi nature to them. If StormPay really WANTS to eliminate fraud, they would STOP allowing blatant ponzis from using their services. No, the hard truth is, that these ponzis generate HUGE revenues for them, and to eliminate them from their customer base, would be corporate suicide. With fraud on the rise, it's only a matter of time before the US authorities start cracking down, and StormPay may have to relinquish their cash cows (autosurfs/HYIPs).

Now, the question is, what will the legitimate companies do? Will they capitulate? Well, that depends on how much they've invested into StormPay. Can they afford to do a dramatic switch over to a new processor, forcing their members to switch as well?

Take the example of 12DP. They have decided to comply. Below is the full text from a recent announcement:

Urgent - Payment Processor Change - by Charis - 12DP Admin at 2006-01-31 10:20:09
There has been a very disturbing development regarding our payment processors that we need to share with all of you.

As you know, we recently removed E-Gold as a payment processor and added EMO, as we wanted to provide our members with reliable payment processing options, that would allow you to make a choice as to which processor bests suits your needs. We developed a relationship with EMO who has been extremely helpful in making the transition as smooth as possible for our members and staff. We have nothing but praise for their security, their fee structure, and their professionalism.

We were actually very surprised at the large number of members who choice EMO as their new option. In fact the number of members who choice to have their compounded upgrades paid to EMO was exponentially more than we had thought it would be. Thus we ended up with a considerable surplus of Stormpay funds, money intended to pay the compounded upgrades. As soon as we realized this, begun to withdraw sufficient funds from Stormpay to our bank account so that we could properly meet our obligations to all Egold/EMO and Compounded/EMO members. We were due withdrawals in our bank account last Thursday that would have allowed us to complete all of these payments according to our 7 day terms. The money did not clear our banks on Thursday. It did not clear on Friday. At this point were forced to extended the payment of compounded EMO upgrades to 10 business days. However, anticipating the funds would surely clear on Monday, we maintained our Dec. 31 deadline for the payment of all E-Gold/EMO withdrawals.

We discovered Sunday night, that the delay in receiving funds was not simply slow banking. On Sunday night we received a notice from StormPay informing us that they had cancelled all our pending withdrawals and could only pay us by bank wire or check. They also informed us that they would not continue doing business with us if we continued to offer our members the ability to upgrade with EMO. On Monday morning we attempted to arrange our bank wire with Stormpay, hoping to have time to come to some fair resolution that would allow us to maintain both payment processors. StormPay informed us at this time that they would not allow the release of our funds until we removed EMO as a payment option from our site. We were given a 5pm deadline in order to do so. Not doing so would result in StormPay disallowing any further upgrades incoming purchases through them. The only account functions we would have been allowed at that point would have been to refund all funds in our account to the purchaser, which would not have allowed for any earnings or commissions to be paid to these StormPay members.

We held a conference all with StormPay yesterday evening, in an attempt to negotiate some other solution. They informed us that due to the high degree of fraud and chargebacks by some of our members and the associated credit risk for their company that they would not continue to put themselves at that risk as long as we were allowing our members another payment option. They also expressed concern over the potential fraud of members being using both processors as a means to pass money in a fraudulent way. They informed us that as long as we offer any other payment option to our members, they will not do business with us and will not allow us unrestricted access to the funds in our account.

While we are very disturbed by their requests and do not agree with their reasoning, right now we are forced to capitulate, due to the fact that now 75% percent of our membership utilizes StormPay as their payment option. So, as of 10am today, we have removed EMO as an upgrade option with 12daily Pro. At StormPay’s behest, the only payment processor that will be accepted at 12daily Pro is StormPay.

We are extremely disappointed at this turn of events and are going to do everything we can to make this transition smooth. We selected EMO as an option because our their security, their low fees, and the flexibility. LifeClicks wants to continue our relationship with this processor. Because of this and because of our dedication to all of our members who have now created EMO accounts, we will be stepping up the launch of our new program, which will accept EMO, by a few weeks. We hope to have the site launched and available within the next couple of days. Stay tuned for more information on this.

Currently pending Egold/EMO upgrades:
We have paid out approximately 80% of these. By this afternoon, we will have paid through half of the Jan 8 expirations. Due to the delay in placing the necessary funds in EMO to complete this payments, we will have to extend the deadline for the remainder of these to February 3. If you are wondering, while there are many expiration days left to be paid, there are considerably fewere upgrades on each day than for previous days which some days only have less than a dozen. We hope to have them done before that date, but it is all dependent on the speed of our banking transactions.

Currently pending Compounded/EMO upgrades:
For those of you that chose your compounding option to be paid to EMO, your payments will also be affected. We want to give you all again the option at this point to change your payment option to StormPay, which will allow you to be paid within 7 business days of your expiration. If you use to remain with the EMO option, the new payment deadline will be within 15 business days. We know that you have all already been very patient and that many of you have been waiting for payment since December. However, we hope that the extra monies you were able to earn by not having to pay pa processor fees for the compounded funds and being allowed to upgrade and earn far beyond our 6K limit in many cases, will help offset your wait. We will allow anyone that wants to change to StormPay at this time until tomorrow at noon before we will ‘lock in’ your payment Ids to your withdrawals again.

Currently pending regular EMO withdrawals:
Those of your who have currently pending EMO withdrawals, these will be paid within 10 business days of expiration.

Currently active EMO upgrades:
Those of you who have currently active EMO upgrades will be allowed to complete your 12 day upgrade cycle and will be paid within 10 business days of expiration.

E-Gold Upgrades which have yet to expire:
The EMO option will no longer be available. Also, if you choose to compound, you will only be able to receive the compunded withdrawal to Stormpay.

Again, we want all of you to understand that this choice is not voluntary and we did everything we could to try to negotiate some alternative. This final choice was one that we needed to make to insure that all of our members receive their deserved earnings and that the program and the company can continue for the benefit of all involved.

We will be making daily updates on this matter to keep you all informed as we move through this transition. We will also be arranging a moderated chat session, a LifeClicks town meeting of sorts later this week, to give members a chance to have any questions they might have about this matter or the program in general addressed.

We also want to ask you to refrain from any negative feedback to StormPay regarding this issue. While we don’t agree with their actions, we accept that they are doing what they feel is best for their company.

We thank you in advance for your cooperation and your professionalism as we overcome yet another challenge that will spur us on toward greater things.

Thank you.
Last change at 2006-01-31 10:42:49