Earlier this year, the CFPB filed a complaint in Atlanta federal district court targeting an alleged debt collection scam in which not only were the debt collectors named as defendants (Debt Collectors) but three companies involved in providing payment processing services to the Debt Collectors were also named as defendants. One of those companies processed payments for the debt collectors and the other two companies were independent sales organizations (ISO) that marketed the processor’s services to merchants and were responsible for screening and underwriting merchants.
In its complaint, the CFPB charged the processor and ISOs (collectively, the Processors) with providing “substantial assistance” to the Debt Collectors’ unfair and deceptive conduct in violation of 12 U.S.C. Section 5536(a)(3). This section of the Consumer Financial Protection Act (CFPA) makes it unlawful for “any person to knowingly or recklessly provide substantial assistance to a covered person or service provider in violation of the provisions of section 5531 [which prohibit unfair, deceptive or abusive acts or practices]… and notwithstanding any provision of this title, the provider of such substantial assistance shall be deemed to be in violation of that section to the same extent as the person to whom such assistance is provided.”
The court recently issued an opinion denying a motion to dismiss filed by the Processors.