MoneyGram sued by U.S., New York for unfair remittance transfers

MoneyGram International Inc (MGI.O) was sued last week by two regulators that said it repeatedly and unfairly violated a federal rule designed to make it easier for people to send money to friends and family outside the United States, according to Reuters.

The complaint against MoneyGram, a provider of remittance transfers, was filed in Manhattan federal court by the US Consumer Financial Protection Bureau (CFPB) and a New York Attorney General.

Remittance transfers let people in the US send money electronically to people in other countries, and exceed USD 100 billion annually. MoneyGram was accused of having repeatedly ‘stranded’ recipients waiting for their money, given senders inaccurate information about when transfers would be completed and failed to address customer complaints in accordance with the 2013 rule.

Problems persist despite a series of software and technology updates, with some transactions still getting ‘stuck’ in MoneyGram’s systems, the complaint said. CFPB officials said that MoneyGram spent years failing its customers and failing to follow the law, ignoring customer complaints and government warnings in the process and that its pattern of misconduct must be halted.

MoneyGram Responds to Baseless Litigation and Claims by the Consumer Financial Protection Bureau Director and the NY Attorney General. In a statement, MoneyGram’s representatives responded to „the meritless civil lawsuit” filed by the Consumer Financial Protection Bureau („CFPB”) and the New York Attorney General („NYAG”) and „baseless claims” issued by the CFPB and its director.

The company issued the following statement:

„As the industry leader in compliance and consumer protection, MoneyGram is deeply disappointed that the CFPB and NYAG chose to file yesterday’s meritless lawsuit and that the CFPB chose to issue two press releases littered with gratuitous and inaccurate statements about the Company and the allegations in the case. The Company is fully prepared to vigorously defend itself and expose the meritless nature of the lawsuit in court.

(…) We spent considerable time attempting to educate the CFPB and NYAG about our robust and effective compliance efforts and the weakness of their case, including their failure to show any actual consumer harm. In fact, over the past two years, MoneyGram fully cooperated with the CFPB’s inquiries and produced tens of thousands of documents.

More recently, we proactively engaged with the NYAG to educate them on the facts after they joined the CFPB’s case. The Company attempted, in good faith, to negotiate a reasonable resolution, but faced only unreasonable and unprecedented demands in return.  In the end, the Company refused to be strong-armed into an unfair settlement and MoneyGram was given no choice but to litigate this matter and to defend itself in court.

In connection with the filing of yesterday’s complaint, the CFPB director unfortunately chose to issue two press releases that made gratuitous and unfounded public remarks against the Company. However, the actual allegations in the complaint fail to live up to the hyperbolic statements about the Company. In contrast to the CFPB’s public statements, the complaint itself alleges only technical and time-barred infractions of the Remittance Rule and Regulation E and fails to demonstrate any consumer harm or programmatic non-compliance in this regard.”