Global Payments Seeks Dismissal of the CFPB’s ‘Unprecedented’ Accusations

By Jim Daly

Global Payments Inc., the biggest processor swept up in the Consumer Financial Protection Bureau’s April lawsuit against allegedly fraudulent debt collectors, came out with guns blazing Thursday in its first response to the CFPB’s complaint.

“The CFPB’s attempt to hold Global [Payments] responsible for the actions of other defendants is unprecedented,” Atlanta-based Global Payments said in a memorandum supporting its motion to dismiss the complaint. “Moreover, the CFPB’s effort would turn Global and other payment processors into insurers of the businesses they service based on the processor doing nothing more than providing a lawful service—processing payments.”

In addition to Global Payments, the CFPB’s complaint filed in U.S. District Court in Atlanta named as defendants two independent sales organizations that feed transactions to Global Payments, Pathfinder Payment Solutions Inc. and Frontline Processing Corp., as well as another merchant processor, Cleveland-based Electronic Merchant Systems (EMS).

The four companies provided merchant-acquiring services to the accused collection companies, which along with six associated individuals are the main targets in the CFPB’s civil suit. The processors and ISOs, however, facilitated the debt collectors’ alleged fraud by enabling them to accept payment by consumers’ bank cards when they knew, or should have known, that the collectors were engaged in unlawful conduct, the lawsuit says. The suit also named as a defendant a telemarketing services company that allegedly made robo-calls to consumers on behalf of the debt collectors.

Global Payments says the complaint “is devoid of actual facts supporting a plausible claim against Global,” and that the company “was far removed from the conduct challenged in the complaint.”

A CFPB spokesperson did not respond to a Digital Transactions News request for comment by late morning Friday.

The memorandum brings up the federal government’s controversial Operation Choke Point, an effort named by the U.S. Department of Justice that targeted banks and processors whose clientele included fraudulent merchants. Critics accused the Federal Deposit Insurance Corp. and the Federal Trade Commission of expanding that program to deny payment services to legal but often controversial industries, including debt collectors.

“Efforts by the government to hold payment processors liable for the untoward acts of merchants have been widely criticized as misdirected and laden with unintended and undesirable consequences,” Global Payments’ filing says, citing an August 2014 article published by the American Bar Association.

Columbia, Md.-based Pathfinder also raised the specter of Operation Choke Point in a motion it filed Tuesday to dismiss the CFPB’s complaint against it. EMS, meanwhile, said it exercised reasonable due diligence in signing the collections companies as merchants, and that it could not have known they were allegedly trying to collect phantom debts.