Saying the U.S. Consumer Financial Protection Bureau “blatantly” ignored his directions, a federal judge in Atlanta dismissed the agency’s claims against a metro Atlanta payment processor and three others for allegedly aiding fraudulent debt collectors.
The CFPB's case against Global Payments and similar firms pointed to a potentially huge risk for the multibillion-dollar transaction processing industry in Georgia and elsewhere.
In the civil complaint filed in 2015 in Atlanta, the CFPB argued that Global Payments and similar companies were liable if they didn’t take precautions to prevent alleged crooks from repeatedly using their automated payments systems to steal millions of dollars from victims.
But last week, U.S. District Judge Richard Story sanctioned the CFPB by dismissing its complaints against Global Payments and three other payments processors.
Other payments processors named in the case were Frontline Processing, Pathfinder Payment Solutions, and Electronic Merchant Systems.
The judge said the CFPB repeatedly stonewalled the defending lawyer's efforts to find out the facts of the case against their clients.
“The CFPB willfully violated the court’s repeated instructions to identify for defendants the factual bases for its claims and that, in each deposition, it willfully failed to present a knowledgeable …. witness,” Story said in his order dropping the companies from the agency’s case.
The judge noted that the CFPB resisted allowing its staff members to be questioned in depositions, then produced uncooperative witnesses.
In the first deposition, Story noted, a CFPB witness responded to two questions by reading from a script for more than 40 minutes each time, without directly answering the questions. The witness refused to answer other questions, repeating objections that the judge said he had already overruled.
“Together, they demonstrate a willful disregard of the court’s instructions,” he said.
The CFPB could not immediately be reached for comment.
In its civil lawsuit filed in the U.S. District Court in Atlanta, the federal watchdog agency went after about a dozen debt collectors, telemarketing firms and payments processors in metro Atlanta and Buffalo, N.Y. The agency alleged they placed millions of robocalls in which they pressured consumers into paying so-called “phantom” debts they didn’t owe.
Global Payments and the other payments firms were also culpable, the CFPB said, because the alleged fraud wouldn’t have succeeded if they had properly screened and monitored the debt collectors, and hadn’t given them unfettered access to victims’ bank accounts despite signs of criminal activity.
In a hearing after the lawsuit was filed, a lawyer for Global Payments told Story that the CFPB’s complaint went too far by arguing that the company is legally liable if criminals use the same services that the company offers to all its clients.
Earlier this month, Global Payments announced a $1.2 billion deal to acquire a division of Active Network from private equity firm Vista Equity Partners.
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