Payment processor and Former Exec Sued by CFPB

On March 3, 2021, the Consumer Financial Protection Bureau filed a lawsuit in the U.S. District Court for the Northern District of Illinois against a privately-owned, third-party payment processor and its founder and former chief executive officer.

According to the CFPB, the former CEO founded the company in 2015 and ran it until he wound it down in March 2019. The CFPB alleges that between 2016 and 2018, the former CEO and the company processed payments for tech-support companies that purported to offer technical-support services and products over the internet, but purportedly tricked consumers into purchasing expensive and unnecessary antivirus software or services for amounts sometimes as high as $2,000.

The CFPB alleges that the company’s client’s sold their products and services through telemarketing. The Bureau also alleges that the company and its former CEO processed remotely created check payments for more than 100 client companies totaling more than $71 million.

A remotely created check is often produced by a customer or its service provider and drawn from a customer’s bank account. The check often is authorized by the customer remotely, by telephone or online, and therefore does not bear the customer’s handwritten signature.

According to the CFPB, the company and its former CEO continued to process the alleged scammers’ remotely created check payments for months and, in some cases, years, despite purportedly being aware of nearly 1,000 consumer complaints, several inquiries from police departments around the country, and return rates averaging more than 20%.

The CFPB alleges that the foregoing actions were unfair practices in violation of the Consumer Financial Protection Act of 2010 and deceptive telemarketing practices in violation of the Telemarketing Sales Rule. Specifically, the CFPB alleges that the defendants provided substantial support to its tech-support clients in violation of the TSR, and that it knew or should have known that its clients were purportedly using remotely created checks in violation of the TSR’s prohibitions, and were allegedly engaging in fraud.

In pertinent part, the Telemarketing Sales Rule prohibits a seller or telemarketer from creating remotely created checks or causing remotely created checks to be created as payment for goods or services sold through telemarketing. The TSR also prohibits, in pertinent part, any person from providing substantial assistance to a seller or telemarketer when such person “knows or consciously avoids knowing” that the seller or telemarketer is engaged in a practice that violates the prohibition on remotely created checks.

“BrightSpeed’s unscrupulous acts harmed consumers, and in particular older Americans who are more vulnerable to scams,” said CFPB Acting Director David Uejio. “The CFPB will use all its tools at its disposal, including litigation, to take action to protect consumers.”

The CFPB’s complaint seeks injunctive relief and monetary damages, redress to consumers, disgorgement of purported ill-gotten gains, and the imposition of civil money penalties.

FTC lawyers and the CFPB have aggressively policed the payment processing industry in recent years, including those that facilitate fraudulent operations.

Richard B. Newman is an FTC defense attorney at Hinch Newman LLP. Follow FTC attorney on Twitter.

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