Tucked away in a seemingly innocuous paragraph in a complaint, the Consumer Financial Protection Bureau has asserted an extraordinary and potentially far-reaching expansion of its authority.
On June 6, 2016, the CFPB filed an action in a U.S. district court asserting that Intercept Corp. (and each of its owners) engaged in unfair acts and practices in violation of the Consumer Financial Protection Act. Intercept initiates Automated Clearing House (ACH) transactions to consumer accounts on behalf of its merchant-customers. In doing so, Intercept acts as an agent of the merchant-customer, but not as an agent to the consumer whose account is being debited. Nevertheless, the CFPB complaint states that Intercept is a “covered person” under the CFPA because it provides “payments or other financial data processing products or services to consumers[.]” The complaint also states that Intercept processes transactions resulting in the transfer of funds, via the ACH system, from the deposit accounts of consumers to pay for loans and other transactions.
Originally published in Law360, New York on June 27, 2016.
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