IBill Says It’s Still in Visa’s ‘Risk’ Program

Rhett Pardon
NEW YORK — Penthouse International Inc.’s iBill division said that it hasn’t been released from Visa U.S.A.’s risk identification service (RIS), which adds $1.2 million annually in costs to its business.

IBill said last month it had been notified by its processing bank and San Francisco-based Visa that it was the first Internet payment service provider to be released from the program that targets “high risk” merchants.

But iBill in a release on Business Wire this week said that statement was not in fact the case.

The third-party processor, however, said it “intends to be fully compliant” with the program by its third quarter.

IBill, which says it processes credit-card charges for 27 million Internet users, did not return numerous calls to XBiz for this story.

Visa tightened its RIS program last July to bring its chargeback and fraud rates to acceptable levels for online merchants, the company said.

The announcement Tuesday is another troubling sign for Penthouse, which purchased Deerfield Beach, Fla.-based iBill earlier this year.

Last month, New York-based Penthouse said its public shares — which linger as of Thursday morning at about 16 cents a share — would no longer be traded on the Over-the-Counter Bulletin Board and that its stock had been relegated to the Pink Sheets, a stock quotation service that handles high-risk ventures and isn't regulated by the Securities and Exchange Commission.

Penthouse said the move to the Pink Sheets was due to a late filing with the SEC. The adult entertainment giant said that was caused by "a number of factors," including the company's acquisition this year of iBill.

The Justice Department is investigating iBill in an antitrust probe along with two other large adult processors. The probe is seeking to determine whether the two competing online adult payment providers, as well as iBill, collaborated to set fees and if so, whether practices are anti-competitive.

Penthouse told XBiz last month that it believes potential legal claims relating to iBill are in the tens of millions of dollars.

IBill was acquired by Penthouse in March from InterCept Inc. through its Media Billing LLC division. The company said it learned of the federal investigation after closing the deal.

InterCept, itself, has had problems. The Norcross, Ga.-based company, which provides check processing and imaging, took a $4.2 million charge in February to settle with stockholders who accused InterCept of covering up its involvement in porn.

InterCept CEO John Collins last year said that the amount of business derived from "adult entertainment" was just 5 percent to 10 percent of revenues. But it turned out that the company was the largest financial enabler of Internet porn and that it derived nearly 85 percent of its revenue.

Collins late last year tried and failed to take the company public. And just this week, the company said it hired a financial advisor to explore possible options for the company, including selling it, after it almost lost a proxy battle with its shareholders.