MoneyGram sued by CFPB and NYAG for allegedly leaving families “high and dry”

P2P remittance paytech MoneyGram is being sued by the US Consumer Financial Protection Bureau (CFPB) and the New York Attorney General (NYAG) for alleged consumer financial protection law violations.

CFPB and NYAG file lawsuit against MoneyGram

The lawsuit alleges that MoneyGram – one of the largest remittance providers in the US (and in the process of being acquired by PE firm Madison Dearborn Partners) – failed to deliver funds promptly to recipients abroad, “leaving families high and dry”, a claim the company has dismissed as “meritless”.

CFPB director Rohit Chopra says MoneyGram has spent years “failing its customers and failing to follow the law”.

The CFPB says a “significant portion” of the company’s money transfer transactions are initiated by immigrants or refugees in the US sending money back to their native countries.

It is these immigrant communities MoneyGram has “let down”, says NYAG Letitia James. “Companies have an obligation to be transparent with consumers, treat them fairly, and follow the law, but MoneyGram repeatedly failed to do so,” James adds.

Dallas-based MoneyGram responded to the “baseless claims” issued by the CFPB, claiming it is an industry leader in compliance and consumer protection and it is “fully prepared to vigorously defend itself”.

The suit alleges that MoneyGram has stranded customers waiting for their money to arrive, botched instructions to employees on how to resolve disputes and neglected to develop procedures to ensure compliance with money-transfer laws.

The complaint seeks monetary relief for consumers affected, an injunction to stop future violations and imposition of civil money penalties.

In a response to the claims, MoneyGram says it has invested more than $800 million enhancing its compliance programme and doubled the size of its compliance team to build a “best-in-class” programme with “record-low consumer fraud complaints”.

It also highlights its “strong customer experience scores”, 4.9-star rated app, consumer trust ratings and “remarkably high” customer retention rates.

However, the CFPB alleges MoneyGram is “no stranger to financial crime”.

It cites a 2009 $18 million fraud settlement brought by the Federal Trade Commission and says in 2018, MoneyGram agreed to pay $125 million for failing to implement anti-fraud measures following that settlement.

The CFPB adds that in 2012, MoneyGram agreed to forfeit $100 million and enter into a deferred prosecution agreement with the Department of Justice, admitting it criminally aided and abetted wire fraud and failed to maintain an effective anti-money laundering programme. “MoneyGram also violated that agreement,” the CFPB says.

MoneyGram says “hyperbolic” public statements made by CFPB do not reflect allegations in the suit

However, MoneyGram says the US Department of Justice dismissed these claims against the paytech after an independent corporate compliance monitor found its anti-fraud measures were “reasonably designed and implemented to comply with the Bank Secrecy Act”.

On this latest lawsuit, MoneyGram says the accusations made in the suit do not accurately reflect the “hyperbolic statements” made about the company in the two press releases issued by the CFPB and the NYAG.

In contrast to the CFPB’s “gratuitous and unfounded” public statements, MoneyGram says, “the complaint itself alleges only technical and time-barred infractions of the Remittance Rule and Regulation E and fails to demonstrate any consumer harm or programmatic non-compliance in this regard”.

MoneyGram adds it spent “considerable time” attempting to persuade the CFPB and NYAG on the weakness of their case, including their failure to show any actual consumer harm, producing “tens of thousands” of documents to support that assertion.

“In the end, the company refused to be strong-armed into an unfair settlement and MoneyGram was given no choice but to litigate this matter and to defend itself in court,” MoneyGram says.