CFPB Sues MoneyGram Over Remittance Rule Violations

April 25, 2022
Just a week after instigating a lawsuit against TransUnion, the US consumer watchdog is now going after MoneyGram, another large firm it sees as a repeat offender.

Just a week after instigating a lawsuit against TransUnion, the US consumer watchdog is now going after MoneyGram, another large firm it sees as a repeat offender.

Last Thursday (April 21), the Consumer Financial Protection Bureau (CFPB) and New York attorney general Letitia James filed a lawsuit against MoneyGram, one of the largest remittance providers in the US.

According to the regulators, MoneyGram unnecessarily delayed the processing of certain remittances and repeatedly violated other consumer financial protection laws.

“MoneyGram spent years failing its customers and failing to follow the law, ignoring customer complaints and government warnings in the process,” said CFPB director Rohit Chopra. “MoneyGram’s long pattern of misconduct must be halted.”

The agencies allege MoneyGram failed to make remittance transfers timely available and instead held up funds unnecessarily.

“Holding the money in limbo resulted in needless delays and harmed people who were relying on that money to pay for necessary living expenses,” the CFPB said.

In addition, the company repeatedly failed to accurately disclose how long it would take to make funds available to the recipients abroad.

MoneyGram employees did not get sufficient guidance on how to comply with laws on resolving disputes and they did not inform consumers or provide a written explanation of the results of its error investigations.

In addition, the firm did not put in place policies and procedures designed to ensure compliance with money transferring laws and failed to document its compliance with certain error resolution requirements as required.

In his prepared remarks, Chopra said the CFPB is now concerned about “broader problems in payments and international money transfer markets”.

“Specifically, we believe there is significant noncompliance of the Remittance Rule by nonbanks…Today’s remittance market is ripe for reinvention, and the CFPB will be examining ways to increase competition and innovation for the benefit of both families and honest businesses, while also avoiding creating a new set of harms,” he stressed.

Chopra has previously spoken out against large firms that he believes exploit US hard workers, and in late March he singled out repeat offenders as the primary focus of his agency.

“This isn’t the first time MoneyGram has been in trouble with the law. Sadly, nor is it the second. MoneyGram is a repeat offender that violates formal law enforcement orders,” Chopra noted.

Between 2009 and 2018, MoneyGram paid hundreds of millions in fines to the Federal Trade Commission and the Department of Justice to resolve fraud charges.

In response to the action, MoneyGram said it is “deeply disappointed” about the “meritless” lawsuit and the CFPB press releases that are “littered with gratuitous and inaccurate statements about the company”.

“MoneyGram cares deeply about its customers and is committed to consumer protection,” the firm stressed, adding that the company has invested more than $800m to enhance its compliance programme over the past decade.

The company said it produced tens of thousands of documents to the regulators and “spent considerable time attempting to educate the CFPB and NYAG about our robust and effective compliance efforts and the weakness of their case”.

“We look forward to vigorously defending our compliance program and commitment to consumers in court.”

Political agency

The consumer financial protection regulator was established in 2010 by the Obama administration following the financial crisis. Its primary goal was to prevent risks to consumers in markets that previously had not had many federal protections or where the existing protections had not been updated in decades.

In case of spotting unlawful practices, the CFPB can seek monetary restitution for harmed consumers and impose fines on companies.

However, the agency has been amid a field of political debates from the beginning, with Republicans criticising what they called a "radical structure" that "is controlled by a single individual who cannot be fired for poor performance and who exercises sole control over the agency, its hiring and its budget”.

After initiating 201 enforcement actions under Obama appointees during its first six years, the CFPB’s law enforcement productivity had a significant drop under Trump’s presidency, opening just 82 cases.

As such, many predicted that following the 2020 elections the new administration would likely give the teeth back to the CFPB. With the approval of Chopra as the director of the agency, these predictions seem to be fulfilled.

Since the start of his tenure, his agency has launched a sweeping inquiry into bank fees and is looking at bigtech payment processors’ data governance and buy now, pay later products.

The lawsuit against MoneyGram follows the opening of a case against TransUnion two weeks ago, as the CFPB doubles down on its enforcement of what Chopra describes as “repeat offenders”.

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