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The international money transfer provider has settled out of court with New York State in a lawsuit alleging it did not make funds available to customers punctually, in breach of the 2013 Remittance Transfer Rule.
It agreed to pay $250,000 for failing to follow consumer protection laws and putting customers’ money transfers at risk.
In 2022, the Consumer Financial Protection Bureau (CFPB) and the Attorney General of New York, Letitia James, sued MoneyGram for repeatedly flouting the Remittance Transfer Rule.
They accused the company of failing to transfer funds on time, not giving customers prompt refunds, and not meeting legal requirements to investigate mistakes expeditiously.
The lawsuit also alleged that MoneyGram had failed to comply with policy-and-procedure and document-retention requirements.
The CFPB withdrew from the lawsuit in April, one of a slew of cases from which it retreated as the Trump administration moved to downsize the agency, leaving New York’s attorney general the only plaintiff in the case.
Attorney General James said her office had stopped MoneyGram’s illegal behaviour and would continue to protect those who relied on the service to support their families.
“New Yorkers who want to send funds to their loved ones abroad should be able to trust that the companies handling their hard-earned money are operating honestly,” she added.
“MoneyGram failed to follow the law for years, sometimes leaving its customers in the dark about where their money went.”
MoneyGram general counsel, Cory Feinberg, said in a statement, “We are pleased to bring full closure to this legacy matter, which dates back years and involved no harm to consumers.”
A bumpy ride
The settlement requires MoneyGram to comply with consumer protection laws by transferring funds and processing refunds on time.
Under the terms of the agreement, it must also ensure that disclosures to consumers are accurate and that it investigates errors in a timely fashion.
In addition, MoneyGram is prohibited from providing money senders with inaccurate disclosures and telling consumers that they are not liable for errors.
MoneyGram has had a bumpy ride in the past 12 months. As covered by Vixio, in September 2024, the firm was the target of a major hack of its customer information.
Between September 20 and 22, the remittance company said that an “unauthorised third party” accessed and acquired personal information of certain consumers.
The hack was an open goal due to a lack of encryption, insiders at the company said.
Weeks later, MoneyGram appointed Anthony Soohoo as its new chief executive officer, succeeding Alex Holmes with immediate effect.
The company said Soohoo’s appointment was driven by its digital innovation strategy.
State action
The CFPB’s withdrawal from the lawsuit is consistent with its reinvention as a hands-off regulator under the second Trump administration.
In its absence, it may be that states increasingly take on some of the responsibilities previously shouldered by the agency.
In this case, the New York authorities continued to pursue the lawsuit after the CFPB retreated, and was able to claim victory on behalf of consumers.
New York Attorney General Letitia James has already shown herself willing to take up the fight. In March, as covered by Vixio, she introduced the Fostering Affordability and Integrity through Reasonable (FAIR) Business Practices Act, which seeks to offer new safeguards for consumers and small businesses.
Her approach offers some indication of what it might look like for payments firms if states do start to impose consumer protection rules and guidance at a local level.
State-level activity might offer a degree of clarity in areas where the regulator’s decision to take a step back has left gaps, but it could also lead to significant fragmentation in the regulatory framework, adding a layer of complexity for firms that operate nationwide.
