With the news on Friday that a judge had dismissed the Consumer Financial Protection Bureau’s claims against Atlanta-based processor Global Payments and three other payments providers, what can payment facilitators take away from the outcome?
The short answer: nothing has changed.
This particular case began its journey through the legal system in 2015, when the CFPB filed a complaint against individuals it said were leading a fraudulent debt collection robocall scheme.
The CFPB filed suit against the alleged perpetrators of the scheme. But it also argued that the service providers bore some responsibility, saying that the individuals could not have operated a successful scheme without their assistance.
“The CFPB contends that by enabling the debt collectors to accept payment by credit and debit card, the payment processors helped to legitimize the collectors’ business and facilitated millions of dollars in ill-gotten profits,” the agency wrote in a press release at the time.
On Friday, U.S. District Court Judge Richard Story dismissed the claims against the processors.
However, in doing so, Story did not cite the merits of the argument against them. Instead, he took issue with the agency’s conduct throughout the case regarding the processors’ role.
“The Court finds that 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,” the judge wrote.
In a separate case, another judge dismissed the agency’s claims against payments processor Intercept earlier this year.
The outcomes of these cases do not absolve payment facilitators of their responsibility to the payments ecosystem and the need to be vigilant, according to Deana Rich, president of Rich Consulting and publisher of PaymentFacilitator.com.
“It remains payment facilitators’ responsibility to know their portfolios and apply best practices accordingly,” Rich said. “High-risk merchants in particular may require full underwriting and more in-depth transaction monitoring to weed out fraudulent businesses.”
As Rich and other industry legal and compliance experts have previously emphasized, payment facilitators are required to monitor their submerchants carefully. Continuing to do so will help them avoid the risk of being exploited by bad actors.