Square Hit With Cease-and-Desist Order and Massive Fine in Illinois

square, twitter, social media, social networks, mobile appsSquare is facing a cease-and-desist order and a huge fine in the state of Illinois, according to a regulatory filing made in January and released today.

Ride-sharing apps have also been hit with cease-and-desist orders and fines by regulators who see them as car services rather than technology through with drivers and riders come to private arrangements.

In Illinois, “transmitting money” requires a license.

“No person may engage in this State in the business of selling or issuing payment instruments, transmitting money, or exchanging, for compensation, payment instruments or money of the United States government or a foreign government to or from money of another government without first obtaining a license under this Act,” the law further states.

Square, founded by Twitter co-founder Jack Dorsey, describes itself as “a merchant payment processor.”

Square provides an attachment for mobile devices that turns them into credit card readers. It charges merchants a monthly flat rate or a small percentage of each transaction.

“Square processes payments you receive from your customers. This means that we collect, analyze and relay information generated in connection with these payments,” the company’s legal fine print says.

“They are a merchant agent in a card-based commerce transaction. They never take possession of funds, but send instruction,” tweeted Thomas Noyes, a former Citi executive.

The state is assessing a fine of $1,000 per transaction plus four times the total amount transacted in each case and $1,000 per day for each day the company has violated the law.

“We’ve been in close contact with the Illinois Division of Financial Institutions for several months and are addressing their concerns,” a Square spokesman told SocialTimes.

Related Stories
Mediabistro Course

Instagram Marketing

Instagram MarketingStarting October 27, learn how to gain likes and followers on one of the most popular social media platforms! In this course, you'll learn how to develop an Instagram strategy that will make your profile stand out and gain new followers, tell a brand story through photos, and use your Instagram profile to drive your sales and business objectives. Register now!