CFPB Files Suit Against Payment Processor for Its Customers’ Alleged ScamsOn March 3, 2021, the CFPB filed a lawsuit in the U.S. District Court for the Northern District of Illinois against BrightSpeed Solutions, Inc., a third-party payment processor, and Kevin Howard, BrightSpeed’s founder and former chief executive officer. In its complaint, the CFPB alleges that between 2016 and 2018, Howard and BrightSpeed knew or should have known that it provided payment processing services for clients “who purported to provide virus software and technical-support services, but actually scammed consumers into purchasing unnecessary and expensive computer software” in violation of the Consumer Financial Protection Act of 2010 and the Telemarketing Sales Rule. The CFPB alleges that BrightSpeed intentionally served “high risk” clients who often could not obtain payment-processing services from other processors because of the risk of fraud associated with their businesses. These allegations suggest that BrightSpeed and Howard failed to implement or otherwise enforce policies intended to weed out potential fraud.

While this enforcement action may seem harsh, as it seeks to hold a company responsible for the actions of its clients, it should come as no surprise to those tracking the CFPB’s trend toward increased scrutiny of financial services companies generally. Acting Director David Uejio announced on January 28, 2021, that the CFPB will spend its first weeks “reversing policies of the last administration that weakened enforcement and supervision.” Uejio also announced that the CFPB is planning to rescind public statements “conveying a relaxed approach to enforcement of the laws in [the Bureau’s] care.” This latest enforcement action against BrightSpeed makes good on those promises. President Biden nominated Rohit Chopra to serve as the next full-time director of the CFPB and, assuming Chopra is confirmed, it seems likely that the CFPB will further reposition itself as more aggressive and less business friendly. The CFPB under Chopra will very likely look and feel much like the CFPB did under prior Director Richard Cordray.

This latest suit by the CFPB serves as a stark reminder that payment processors — and potentially other financial services intermediaries — could be on the hook for the alleged fraudulent acts of their customers. It is now more important than ever for financial services companies to review their policies and procedures to ensure that their clients are not creating unexpected liabilities that could provoke CFPB scrutiny down the road.

Print:
EmailTweetLikeLinkedIn
Photo of Leah M. Campbell Leah M. Campbell

Leah Campbell is a senior attorney in the Banking and Financial Services Practice Group. Leah has significant experience representing financial services and insurance company clients in both federal and state courts, as well as before state regulators. She has advised national mortgage servicers…

Leah Campbell is a senior attorney in the Banking and Financial Services Practice Group. Leah has significant experience representing financial services and insurance company clients in both federal and state courts, as well as before state regulators. She has advised national mortgage servicers on FDCPA claims, loan finance companies on UDAAP claims, and banks on OFAC- related issues.

In addition, Leah has provided intellectual property guidance in M&A and corporate structuring matters and advised on GDPR implementation and cross-border encryption issues.

Photo of J. Tanner Lusk J. Tanner Lusk

Tanner Lusk is an associate in Bradley’s Banking and Financial Services Practice Group.

Tanner received his J.D. from Washington and Lee University School of Law, where he was a student caseworker in the Advanced Administrative Litigation Clinic and a senior articles editor for…

Tanner Lusk is an associate in Bradley’s Banking and Financial Services Practice Group.

Tanner received his J.D. from Washington and Lee University School of Law, where he was a student caseworker in the Advanced Administrative Litigation Clinic and a senior articles editor for the Washington and Lee Journal of Civil Rights and Social Justice. He graduated from Jacksonville State University with a B.A. in Political Science.

Photo of Benjamin William Perry Benjamin William Perry

Ben Perry’s practice spans the spectrum of legal services. On the litigation side, Ben represents clients at the trial and appellate level against a wide variety of claims in state and federal courts. His practice primarily concentrates on complex civil litigation, products liability…

Ben Perry’s practice spans the spectrum of legal services. On the litigation side, Ben represents clients at the trial and appellate level against a wide variety of claims in state and federal courts. His practice primarily concentrates on complex civil litigation, products liability defense, and representing financial institutions and mortgage companies in civil litigation. As part of the Banking and Financial Services Practice Group, he defends mortgage servicers, investors, and related entities against numerous state and federal law claims arising out of lending and loan servicing practices, including alleged violations of the Telephone Consumer Protection Act (TCPA) and various claims relating to the sale of bank-owned real estate. Ben also has substantial experience defending banks and investors in hundreds of cases related to homeowner’s association (HOA) superpriority liens, and he has represented a company’s founder and CEO facing claims brought by the SEC for alleged embezzlement of company funds.

Photo of Tara M. Petzoldt Tara M. Petzoldt

Tara Petzoldt is a commercial litigator who represents clients in a variety of litigation matters involving contracts, franchising, investments, torts, financial services, and intellectual property. Her practice also emphasizes fiduciary, trust and probate litigation.

Tara has represented franchisors in contract disputes, enforcement of…

Tara Petzoldt is a commercial litigator who represents clients in a variety of litigation matters involving contracts, franchising, investments, torts, financial services, and intellectual property. Her practice also emphasizes fiduciary, trust and probate litigation.

Tara has represented franchisors in contract disputes, enforcement of non-competition agreements and restrictive covenants, actions to protect intellectual property, and other business torts. She represents financial services companies in state and federal litigation and regularly defends financial service providers against various claims. Tara defends mortgage lenders, servicers, and other financial services providers against borrower complaints alleging violations of statutes, wrongful foreclosures, and debt collection statutes. She has represented a number of clients in trust and probate litigation matters involving breach of fiduciary duties and fitness to serve as the personal representative of large estates. She has worked on matters related to fraud, duress and undue influence relating to estate-planning documents. She also has experience preparing for and appearing at bench trials, jury trials, and complex evidentiary hearings.