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PsyStar pay processor alleges it was misled on clone sales

Also, the Miami company closes its Web store for second time this week

April 18, 2008 12:00 PM ET

Computerworld - A credit card payment processor terminated the account of the Miami company advertising Mac clones because the computer seller misrepresented what it would sell and failed to properly verify credit cards, the processor's CEO said today.

PsyStar Corp., the company that on Monday announced a system that it said would run Apple Inc.'s Mac OS X, also shuttered its online store Friday -- the second time this week it has closed its only sales channel.

In an e-mail, Stephen Goodrich, the chief executive of Portland, Maine-based PowerPay, explained why his company had terminated the payment processing agreement with PsyStar earlier in the week.

"In its application to PowerPay, PsyStar stated it expected to process a specific amount of credit card transactions per month, and that the product or service being sold was 'consulting for information and communication solutions'," said Goodrich.

PsyStar, however, quickly exceeded its transaction limit, was selling wares "substantially different from what was described in the application" and never validated the cardholder's consent to the charges.

"[PsyStar] processed almost 200% of [its] anticipated annual volume over just a few days," said Goodrich. "In doing so, the applicant never used AVS (address verification services) which is a vital part of validating cardholder consent. This, coupled with the fact that [its] product was substantially different from what was described in the application left PowerPay no choice but to suspend services."

Goodrich also noted that other discrepancies, including PsyStar's mailing address, "only add[ed] to our discomfort with the account." PsyStar has listed four different street addresses on its Web site since Monday.

On Friday, customers were again greeted with a message when they tried to access PsyStar's Web store. "We're sorry but the store is temporarily down," the short message read. "Please send an e-mail to support@psystar.com with the subject line 'UPDATE' so that we can update you when the store comes back online."

The company's e-store -- which is its only sales channel, since it will not take orders over the phone -- had also been closed on Wednesday. Then, PsyStar blamed PowerPay for the outage, saying that it had had to take down the store because the processor "dropped the ball on us and refused to process any more transactions from our company."

Not true, rebutted Goodrich. "PowerPay handles literally billions of dollars of processing volume annually," he said. "The notion that PowerPay 'dropped the ball' or was 'unable to handle a flood of orders' is inaccurate. PowerPay welcomes large volume e-commerce and other merchants and has an exceptional track record and reputation in serving this space."

Yesterday in a telephone interview, a woman who answered PsyStar's phone said that the only reason PowerPay had given for terminating the account was that it had overshot its transaction allowance. "It was all about us going to exceed our limit. That's why they closed our account," said the woman, who would only identify herself as "Maria." She denied that PsyStar had misrepresented what it was going to sell when it struck the agreement with PowerPay.



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