MLM Merchant Accounts: Autoship, Earnings Claims and the FTC's 2026 Cases

A multi-level marketing company sells products, often skincare, supplements, wellness or household goods, through a network of independent participants who are paid on their own sales and on the activity of the people they recruit. To a bank deciding whether to sponsor your merchant account, that structure raises three separate questions: whether the compensation plan is legal, whether the people selling your opportunity are making claims you will be held responsible for, and whether the recurring autoship orders that keep the business running will turn into chargebacks.

This guide is for MLM and direct sales companies, party-plan businesses and the founders building them. It covers how the Federal Trade Commission draws the line between a lawful MLM and a pyramid scheme, the earnings-claim cases the FTC brought in 2026, what the card networks require of autoship billing, and what an underwriter will ask. Rules and cases are cited as they stood in early October 2026.

How the card networks classify MLM sales

Visa's Merchant Data Standards Manual (April 2026) has no merchant category code for multi-level marketing, and neither the manual nor Visa's Core Rules mention MLMs or pyramid schemes by name. The acquirer codes the account for what is actually sold and how. Codes that commonly come up include MCC 5963, Door-To-Door Sales, for products sold through house-to-house visits; MCC 5969, Direct Marketing – Other Direct Marketers, for products sold through direct response methods; and MCC 5968, Direct Marketing – Continuity/Subscription Merchant. Visa's description of 5968 lists cosmetics, clothing and nutraceuticals sold on subscription via direct mail, email, apps or salespeople, which is close to a description of an autoship program.

MLM is high risk because of the regulatory exposure in the compensation plan and the recruiting pitch, and because autoship is recurring billing with the dispute rights that come with it.

Where the FTC draws the line on pyramid schemes

The FTC's Business Guidance Concerning Multi-Level Marketing, dated April 2024, which FTC staff describe as non-binding, starts from the definition in the Commission's 1975 Koscot decision. A pyramid scheme is characterized by participants paying money to the company in return for the right to sell a product and the right to receive, for recruiting others, rewards that are unrelated to the sale of the product to ultimate users.

The guidance makes several points that underwriters read closely:

• Having a real product and some retail customers is not a safe harbor. The FTC says it looks at how a company operates in practice, in a fact-intensive analysis.
• Purchases by participants are not automatically genuine demand. Where participants buy to qualify for compensation, a rank or a bonus rather than because they want the product, the FTC treats that as inventory loading. Monthly or quarterly purchase quotas that participants can meet with their own orders are the example the guidance gives of a plan that is likely incentivizing it.
• A buyback or refund policy does not shield an unlawful compensation structure, and the FTC notes that complicated or poorly publicized refund policies, or social pressure, can stop participants from using them.
• An MLM is liable for deceptive claims its participants make, even if it tried to prevent them or the participant broke the company's direct instructions.

The Direct Selling Association's Code of Ethics, which binds its member companies, requires them to repurchase currently marketable inventory, sales aids and kits within 12 months of the salesperson's purchase at not less than 90 percent of the original net cost, and prohibits encouraging salespeople to buy more inventory than they can reasonably expect to resell or consume. Expect an underwriter to ask whether you offer a buyback on comparable terms. As the FTC guidance makes clear, though, having one does not settle the legal question.

The 2026 earnings-claim cases

Much of the FTC's recent MLM work has been about what participants are told they will earn. In the first half of 2026 it brought a cluster of cases, and two features of them matter to an MLM applying for a merchant account.

• Stormy Wellington, April 13, 2026. The FTC alleged that Wellington, a high-level participant in Total Life Changes and later Farmasi, used YouTube videos and social media to promise recruits five- to seven-figure incomes and to claim she would create 60 new millionaires in 2026. The FTC said Total Life Changes' own figures showed 76.8 percent of active participants earned no compensation in 2023. A stipulated order filed in the Southern District of Florida would bar her from deceptive or unsubstantiated earnings claims and require her to notify her downline.
• Forever Living, April 14, 2026. The FTC alleged that Forever Living Products International, its CEO and its president used images of luxury cars and giant checks, and claims of replacing a full-time income, to recruit participants. According to the FTC, in each of the last five years at least 77 percent of participants who purchased, sold or recruited received no compensation, and more than 89 percent of new participants had not earned back their start-up cost of $300 or more after two years. The order, filed in the District of Arizona, requires the company to substantiate earnings claims and stop misrepresenting earning potential.
• Steven and Gina Merritt, April 27, 2026. The FTC alleged that the couple, senior participants in LifeWave, told people they could earn $25,000 or more a week, while LifeWave's 2024 income disclosure showed 79 percent of active participants earned no commission. A stipulated order was filed in the Southern District of Florida.
• IM Mastery Academy, May 13, 2026. The FTC and the State of Nevada announced that the lead defendants behind IM Mastery Academy, which also operated as iMarketsLive, IM Academy and IYOVIA, would surrender assets valued at nearly $90 million. The FTC alleged they used false or baseless earnings claims to sell training on investing in financial markets and an MLM venture built around it, which took in more than $1.2 billion since 2018. The proposed order imposes a $795.8 million judgment; the balance beyond the asset surrender becomes due only if the defendants are found to have misrepresented their finances.

The first lesson is that the FTC is now going after individual top earners as well as companies. Two of the 2026 actions named participants rather than an MLM company. The second is that the companies' own income disclosure statements were the evidence. In a June 2026 business blog post on these cases, FTC staff stressed that the unusual success of a handful of people cannot support a claim about what a typical participant earns, and that an MLM can be held responsible for deceptive claims made by its distributors.

Rules may follow. On January 13, 2025 the FTC announced a proposed Earnings Claim Rule Regarding Multi-Level Marketing, to be codified at 16 CFR part 462. It would make it a rule violation for an MLM or any of its participants to make an earnings claim without written substantiation, to make a false or misleading earnings claim, to use claims that undercut truthful earnings information, or to present an MLM as an employment opportunity. The proposal defines an earnings claim to include statements or images from which a recruit can reasonably infer a material lifestyle change. As of October 2026 it is still a proposal: the FTC's regulatory agenda of August 14, 2026 lists it as a proposed rule, and no final rule has been issued. In the meantime, deceptive earnings claims can already be challenged under Section 5 of the FTC Act.

Autoship is recurring billing

Most MLMs depend on autoship: a monthly order that ships to a customer or participant automatically, often because staying on autoship keeps a participant qualified for commissions. To the card networks that is a recurring transaction, and the rules are specific.

Visa's rules (18 April 2026) require a merchant running recurring transactions to provide a simple cancellation procedure, and an online one if the order was accepted online, and to state the fixed dates or intervals of the charges. Where a trial, introductory or promotional period is ending, the merchant must notify the cardholder at least seven days before the next charge, with the amount, the date and an easy way to cancel. The terms of the recurring agreement must be shown at the moment the cardholder consents, separately from the general purchase terms.

If a cardholder cancels and the charges keep coming, the issuer can file Visa dispute condition 13.2, Cancelled Recurring Transaction, within 120 days of the processing date. As of April 18, 2026, a 13.2 dispute is invalid where the cardholder's cancellation came after the date of the transaction, so a clean record of when each cancellation arrived is now direct evidence. Autoship disputes count toward your dispute ratios like any other, and those ratios are what card network monitoring programs track.

Federal law adds its own requirements for autoship sold online. The Restore Online Shoppers' Confidence Act requires a seller using a negative option to disclose all material terms clearly before taking billing information, obtain express informed consent before charging, and provide simple mechanisms to stop recurring charges. The FTC's 2024 click-to-cancel amendments to its Negative Option Rule were vacated by the Eighth Circuit on July 8, 2025, and the FTC published an advance notice of proposed rulemaking on March 13, 2026 to start the process again. ROSCA applies in the meantime, as do state automatic renewal laws. Our guide to free trial and subscription billing rules covers those in detail.

What an underwriter will ask an MLM

Put the FTC's position and the network rules together and the questions on an MLM application are predictable:

• Your compensation plan, in full. Underwriters want to see whether commissions are paid on sales to real customers or on recruiting and participant purchases, and whether any rank or bonus depends on purchase volume a participant can meet with their own orders.
• Your most recent income disclosure statement, and how it was prepared. The FTC's guidance says participants should not be left out of earnings statistics merely because they did not qualify for compensation.
• The split between retail customers and participant purchases, and how much volume runs through autoship.
• Your buyback and refund policy, where participants see it and how often it is used.
• Your marketing and your participants' marketing: income claims, lifestyle imagery, and how you monitor and correct what distributors post on social media.
• Your autoship enrollment flow, cancellation path, renewal notices and descriptor.
• Processing history, chargeback ratios and refund rates for the last six to twelve months, if you have taken cards before.

Getting the account file ready

1. Read your compensation plan the way the FTC would. If rewards depend on recruiting or on participants' own purchases rather than sales to people outside the network, fix the plan before you apply.
2. Publish an income disclosure statement that counts every participant who could have earned, and stop using any income or lifestyle claim it does not support.
3. Put a written policy on earnings claims in your participant agreement, monitor distributor content, and keep a record of what you took down and when.
4. Offer a buyback on terms at least as strong as the DSA standard, and make it easy to find and use.
5. Make autoship cancellable online in a few clicks, send renewal reminders, and keep timestamped records of every cancellation.
6. Use a billing descriptor that matches your brand name, so customers recognise the charge.
7. Keep one storefront per merchant account. Running sales through an account approved for a different business is transaction laundering under card network rules, and it can put your company and its principals on the MATCH list.

MLM is high risk because the regulatory question sits in the compensation plan and the recruiting pitch, both of which the merchant controls. A plan built around retail sales, honest income disclosures and autoship that is easy to cancel is what turns that into an approval on workable terms. PayKings works with MLM and direct sales companies and can help you present that file to an acquiring bank. We do not give legal advice. Whether your compensation plan is lawful is a question for your counsel.