CFPB, NYAG sue MoneyGram to halt ‘long pattern of misconduct’

The CFPB and NYAG filed the lawsuit Thursday in U.S. District Court for the Southern District of New York, after the two sides apparently failed to reach a settlement regarding allegations that MoneyGram held up money transfers unnecessarily; failed to implement clear policies and procedures for resolving disputes; and for failing to ensure compliance with a federal money-transferring law.

“MoneyGram spent years failing its customers and failing to follow the law, ignoring customer complaints and government warnings in the process,” said CFPB Director Rohit Chopra in a press release. “MoneyGram’s long pattern of misconduct must be halted.”

“Consumers deserve to know where their money went. Companies have an obligation to be transparent with consumers, treat them fairly, and follow the law, but MoneyGram repeatedly failed to do so,” James said in a press release. “Today we are suing MoneyGram to correct their unlawful practices and prevent them from further harming consumers. New Yorkers can trust that my office will always protect them from unscrupulous companies.”

Compliance takeaways: In November 2012, MoneyGram agreed to forfeit $100 million and enter a deferred prosecution agreement (DPA) with the Department of Justice (DOJ) 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.

In 2014 and 2016, the CFPB conducted supervisory examinations of MoneyGram and found that the company’s “weak and inadequate compliance management system failed to prevent, timely detect, or promptly correct violations of the Remittance Rule;” committed various violations of the Remittance Rule; and committed unfair acts or practices in violation of federal money transferring law “in connection with their failure to promptly release remittance transfers that had been cleared by their internal screening processes,” the complaint said. The CFPB listed 12 matters requiring attention (MRAs) that needed to be addressed.

A follow-up examination in 2019 concluded that MoneyGram’s “compliance program remained seriously deficient, that they had failed to satisfy eight of the twelve outstanding MRAs, and that they had failed to demonstrate that they employed a reasonable process to promptly release remittance transfers that had been cleared by internal screening processes, resulting in a risk of harm to consumers.”

The CFPB found that MoneyGram had continually violated the Remittance Rule, starting in 2013 and as recently as earlier this year. The company allegedly did not properly investigate notices of error within the 90-day time period laid out in the rule; and closed investigations with incomplete information or due to factors not central to the facts of the complaint, like if it was filed by the customer in a certain time frame. Even if the company did properly conduct an investigation, it often did not properly notify the customer as required by the rule, nor refund the fee, also as required.

The company’s policies and procedures were not clear enough for employees to understand when a complaint regarding an error was covered by the Remittance Rule, which triggered the rule’s error-resolution requirements, the complaint said. The company also failed to comply with the rule’s documentation and recordkeeping provisions.

In 2018, the DOJ extended the 2012 DPA for an additional 30 months, and MoneyGram agreed to pay an additional $125 million because of “significant weaknesses” the agency identified in the company’s anti-money laundering (AML) program. In May 2021, the company announced the DOJ concluded it had fulfilled its obligations under the DPA, including the approval of enhancements to its AML program by a compliance monitor.

MoneyGram responds: In a statement, the company said negotiations with the CFPB and NYAG broke down due to “increasingly unjustifiable and unprecedented demands.”

“The Bureau and NYAG know that MoneyGram has invested heavily in compliance to build a best-in-class compliance program with record-low anti-fraud numbers designed to protect consumers against harm,” MoneyGram said. “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.”

“Ultimately, MoneyGram refused to be strong-armed into an unfair settlement,” the company said. “The company is fully prepared to vigorously defend itself and expose the meritless nature of today’s complaint in court.”

In February, MoneyGram alerted investors it expected to pay approximately $15.8 million to resolve investigations by the CFPB and New York State Department of Financial Services. MoneyGram settled with the NYDFS in March for $8.25 million.

Editor’s note: An original version of this story stated MoneyGram expected to pay approximately $15.8 million to resolve investigations by the CFPB and NYAG. The story was updated April 26 to change NYAG to NYDFS.