MoneyGram International was sued by the Consumer Financial Protection Bureau and New York's attorney general for allegedly failing to deliver money to recipients and for repeatedly violating rules around remittance transfers for years.
The CFPB and Attorney General Letitia James on Thursday sued the Dallas-based remittance provider for engaging in unfair acts or practices for failing to transfer funds, delaying refunds to customers and a slew of other violations.
Regulators allege that MoneyGram repeatedly gave consumers inaccurate information about when their remittance transfers would be available. When customers complained of errors, the company failed to provide a response or remedy, which is required by law.
“This isn’t the first time MoneyGram has been in trouble with the law … nor is it the second,” CFPB Director Rohit Chopra said on a conference call with reporters. “MoneyGram is a repeat offender that violates formal law enforcement orders.”
MoneyGram responded with harsh words for Chopra and said it is “fully prepared to vigorously defend itself” in court.
"MoneyGram is deeply disappointed that the CFPB and New York AG chose to file today’s frivolous lawsuit,” the company said in a statement. “MoneyGram is especially troubled by the unprofessional conduct and today’s gratuitous remarks by the CFPB and its director against the company.”
MoneyGram also said it would not be pressured into a settlement.
“We have spent considerable time attempting to educate the CFPB about the company’s robust and effective compliance efforts and the weakness of its case, including the complete absence of any consumer harm,” MoneyGram said. “Unfortunately, the CFPB and its director entered into discussions with closed minds and unfortunately chose to make increasingly unjustifiable and unprecedented demands upon the company. Ultimately, MoneyGram refused to be strong-armed into an unfair settlement.”
In March, MoneyGram disclosed in a filing with the Securities and Exchange Commission that it had set aside $7.5 million for a potential settlement with the CFPB.
The company said it also had set aside $8.3 million to settle an investigation by the New York State Department of Financial Services that stemmed from a previous deferred prosecution agreement with the Department of Justice in 2012 that was extended in 2018.
The CFPB said its current investigation of MoneyGram began in 2019 when a follow-up supervisory exam found that the company had ignored previous warnings about noncompliance with consumer protection laws.
The CFPB said it had provided MoneyGram a list of twelve specific areas requiring management’s attention that were never enacted.
“Usually, when the CFPB conducts these follow-up [exams] it finds that companies [have] cleaned up their problems,” Chopra said. “But in this case, the CFPB found that MoneyGram ignored previous promises and continued to violate the law — evidently placing profit ahead of its legal obligations.”
MoneyGram has entered into multiple settlements with federal regulators — some of which it later violated, resulting in further sanctions.
In 2018, MoneyGram paid a $125 million fine to the Federal Trade Commission and the Justice Department for failing to crack down on illegal money transfers and failing to suspend or terminate agents with high fraud rates. In 2009 it paid $18 million to the FTC to settle anti-fraud and other charges.
In 2012, MoneyGram agreed to forfeit $100 million to the Justice Department for processing thousands of transactions for its own agents known to be engaging in a widespread money laundering scheme that defrauded tens of thousands of people out of at least $100 million.
The CFPB has alleged that MoneyGram violated the Electronic Fund Transfer Act, part of which was amended in 2010 by the Dodd-Frank Act to provide more protections for remittance transfers. The EFTA went into effect in 2013.
