ACH Processor for Payday Loan and Car Title Loan Lenders Charged by CFPB
42. For example, an ODFI complained to Defendants that one of its clients, an auto title lender, which was debiting varying amounts from consumers’ accounts multiple times, did not have the contractual right or proper consumer authorization to do so, stating that it was “not ok [for the] merchant to us[e] the ACH to ‘sneak’ attack a consumer’s account, [as] it will only draw regulatory attention.”
Consumer Financial Protection Bureau, Plaintiff, v. Intercept Corporation [InterceptEFT],
d/b/a InterceptEFT,
Bryan Smith, individually, and as owner and president of Intercept Corporation,
Craig Dresser, individually, and as owner and CEO of Intercept Corporation Defendants
Alleged by the CFPB:
Defendants have failed to heed warnings from banks and consumers.
40. Defendants have ignored warnings from ODFIs and consumers that some of Intercept’s clients’ business activities were likely illegal or that debits were not authorized by consumers.
41. Intercept’s ODFIs have expressed concerns to Intercept, Smith, and Dresser about potential indicia of fraud by certain of Intercept’s clients, such as high return rates, discrepancies between the dates and amounts debited from consumers’ accounts compared to what the consumer had authorized, changes in lender names from the initial loan agreements with the consumer, and missing telephone scripts for ACH transactions authorized by phone.
42. For example, an ODFI complained to Defendants that one of its clients, an auto title lender, which was debiting varying amounts from consumers’ accounts multiple times, did not have the contractual right or proper consumer authorization to do so, stating that it was “not ok [for the] merchant to us[e] the ACH to ‘sneak’ attack a consumer’s account, [as] it will only draw regulatory attention.”
43. On numerous occasions, Smith and Dresser have been personally involved in responding to Intercept ODFIs when those banks expressed concerns about certain Intercept clients or transactions, including concerns about high transaction volumes, high return rates, loans being made to consumers in states where those loans were illegal, or complaints from consumers that they had not authorized withdrawals.
44. If an ODFI raised concerns or terminated its relationship with Intercept, Smith and Dresser would find a new ODFI to process on behalf of Intercept for the same clients. As a result, Intercept had relationships with eight different ODFIs between 2008 and 2014, sometimes processing through three different ODFIs at the same time. Case 3:16-cv-00144-ARS Document 1 Filed 06/06/16 Page 8 of 269
45. For example, in at least once instance, Intercept entered into a short-term or trial period with an ODFI to process a limited number of transactions through the bank, and then, instead, ran millions of dollars of ACH transactions through the bank, generating high volumes of returns in disputed transactions.
46. The ODFI was initially reluctant to do business with Intercept due to Intercept’s projected transaction volume and historical return rates for certain clients. Defendant Dresser responded to these concerns by urging the bank to continue processing for a trial period, stating that what made Intercept successful was its willingness to do business with companies that others would not, including companies that were not considered “clean business.”
47. The ODFI continued to express concerns about the number of returns generated by Intercept’s ACH transactions, which exceeded the terms of their trial period, stating that the bank was receiving thousands of returns per day. The bank further warned Defendants that the return percentages were so high they could trigger an audit.
Here’s a link to the complete Complaint and Civil Action: CFPB vs ACH Processor Intercept EFT
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