The United State District Court for the Northern District of Georgia has
denied a motion to dismiss filed by three companies (collectively referred
to as “Processors”) involved in providing payment processing
services to defendants, Universal Debt and Payment Solutions, LLC and
Credit Power, LLC (collectively referred to as “Debt Collectors”).
The claim was brought by the
CFPB under the Dodd-Frank Wall Street Reform and Consumer Financial Protection
Act alleging that the Processors provided “substantial assistance
to the Debt Collectors’ unfair or deceptive conduct.” In their
motion to dismiss, the Processors alleged that the CFPB did not “adequately
allege knowledge or recklessness, or that the Payment Processors provided
substantial assistance to the Debt Collectors.”
In its detailed opinion the court decided that for the CFPB’s complaint
to survive the Processor’s motion to dismiss, the CFPB must prove
that the acts of each of the three Processors satisfy the definition of
severe recklessness formulated by the Eleventh Circuit. This definition states:
Severe recklessness is limited to those highly unreasonable omissions or
misrepresentations that involve not merely simple or even inexcusable
negligence, but an extreme departure from the standards of ordinary care,
and that present a danger of misleading buyers and sellers which is either
known to the defendant or is so obvious that the defendant must have been
aware of it.
The court found that the complaint alleged by the CFPB properly proved
the severe recklessness of the Processors.
Additionally, after discussing the definition of “substantial assistance,”
the court determined that the CFPB’s alleged facts could support
a finding that the Processors “knowingly or recklessly provided
substantial assistance to the Debt Collectors.” The court also determined
that the Processors were not “covered persons” and were within
the jurisdiction of the CFPB. As a result of its findings, the court denied
the motions to dismiss of all three processing companies.