On June 6 2016 the CFPB sued Intercept Corporation, a payment processor, and two of its executives, Bryan Smith and Craig Dresser, for allegedly enabling unauthorized and other illegal withdrawals from consumer accounts by their clients. In the suit filed in federal district court, the CFPB alleges that Intercept turned a blind eye to blatant warning signs of potential fraud or lawbreaking by its clients. These include actions by federal and state authorities, and sky-high rates of returned payments because of unauthorized withdrawals, insufficient funds, or invalid or closed accounts. In its suit, the CFPB seeks to put an end to unlawful practices by Intercept, Smith, and Dresser, obtain relief for consumers, and impose penalties.
On March 17, 2017 the U.S. District Court granted the defendant’s motion to dismiss the case. Judge Erickson wrote, “The complaint simply does not sufficiently identify particular clients whose actions provided “red flags” to Intercept or how Intercept’s failure to act upon those “red flags” caused harm or was likely to cause harm to any identified consumer or group of consumers. Although the CFPB strongly urges this court to find that the complaint’s factual detail is sufficient to allow defendants to recognize the specific clients, the complaint does not provide the court with sufficient information or factual detail to analyze whether it is sufficient to state a claim for relief. A complaint containing mere conclusory statements without sufficient factual allegations to support the conclusory statements cannot survive a motion to dismiss. The defendants’ motion to dismiss, under Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim is granted.”
“The court deems it unnecessary to decide the issue of the constitutionality of the CFPB at this time. Should the CFPB decide to renew this action in this court or another court, the issue may be addressed appropriately at that time.”
Did the CFPB have a losing case from the beginning or did their attorney’s do a poor job of presenting the case? Could it be that the CFPB got use to defendants rolling over and signing a consent decree rather than fighting? It certainly appears that Intercept engaged in questionable practices. But the CFPB lost the case through poor effort, a biased judge or for some other reason. The court’s indicated that if the CFPB decided to renew the action they may also have to defend their very existence.
