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Dismissal Declined in CFPB Case against Technology Providers in Debt Collector Scam

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.

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