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MoFo Reenforcement The Enforcement Blog

ACH Debit Transactions – Whose Agent Are You?

Posted in CFPB, Enforcement Actions, UDAAP

Tucked away in a seeming innocuous paragraph in a complaint, the CFPB has asserted an extraordinary and potentially far-reaching expansion of its authority.

On June 6, 2016, the CFPB filed an action in a U.S. district court asserting that Intercept Corporation (Intercept) (and each of its owners) engaged in unfair acts and practices in violation of the CFPA. Intercept initiates ACH transactions to consumer accounts on behalf of its merchant-customers. In doing so, Intercept acts as an agent of the merchant-customer, but not as an agent to the consumer whose account is being debited. Nevertheless, the CFPB complaint states that Intercept is a “covered person” under the CFPA because it provides “payments or other financial data processing products or services to consumers[.]” The complaint also states that Intercept processes transactions resulting in the transfer of funds, via the ACH system, from the deposit accounts of consumers to pay for loans and other transactions.

This is not the first complaint/enforcement order in which the CFPB has asserted that a payment processor has engaged in an unfair or deceptive practice, but this is the first action in which the CFPB has asserted that a payment processor is subject to the CFPB’s authority under this novel reading of the definition of a “covered person” under the CFPA.

Read our client alert.