United States: Judge Punishes CFPB For Misconduct Toward Payment Processors

Last Updated: September 14 2017
Article by Dustin N. Nofziger, Jeffrey Alberts and Pinchus D Raice

In an order that could have important implications for the enforcement efforts of the Consumer Financial Protection Bureau ("CFPB") and other of the federal financial regulatory agencies, last month U.S. District Judge Richard W. Story of the Northern District of Georgia sanctioned the CFPB for willful discovery misconduct by dismissing several third party payment processors from a multi-defendant CFPB enforcement litigation. 

The order in CFPB v. Universal Debt Solutions, LLC, No. 1:15-CV-859 (N.D. Ga. Aug. 25, 2017), marks the second major setback this year for the CFPB in its efforts to pursue third party payment processors for alleged violations of the Consumer Financial Protection Act ("CFPA"). In March, a federal district judge in the District of North Dakota dismissed a CFPB lawsuit against a third party payment processor without prejudice, noting that the CFPB's complaint had failed to allege sufficient facts to show that the payment processor's allegedly unlawful acts or omissions violated industry standards or injured consumers. See CFPB v. Intercept Corp., No. 3:16-CV-144, 2017 WL 3774379, at *4 (D.N.D. Mar. 17, 2017). 


The CFPB's complaint in the Universal Debt Solutions matter sought civil money penalties and injunctive and other relief against both "debt collectors" and "payment processors."  The payment processors included Global Payments, Inc., a major publicly-traded payment processor with a $14.9 billion market capitalization. The CFPB's complaint alleged that the payment processors had facilitated a scheme by the debt collectors to defraud consumers by using threats, intimidation, and harassment to collect "phantom" debts that the consumers did not owe or that did not belong to the debt collectors. After the debt collectors obtained the consumers' payment information, the CFPB alleged, the debt collectors provided that information to the payment processors, who enabled the debt collectors to accept check, card, and electronic payments and provided the debt collectors with a false patina of credibility. 

After the CFPB survived the payment processors' motion to dismiss, see CFPB v. Universal Debt & Payment Solutions, LLC, No. 1:15-CV-00859, 2015 WL 11439178, at *1 (N.D. Ga. Sept. 1, 2015), the payment processors utilized Federal Rule of Civil Procedure 30(b)(6) to serve the CFPB with corporate representative deposition notices. Rule 30(b)(6) allows a party to a lawsuit to name an organization as the deponent, and to require the organization to designate one or more knowledgeable persons to testify on specified topics on the organization's behalf. The payment processors noticed the CFPB under Rule 30(b)(6) on such topics as:

  • The facts relating to the CFPB's claim that a payment processor "knowingly" provided "substantial assistance" to the allegedly unlawful conduct of the debt collectors by approving merchant applications from the debt collectors that were "replete with indicia of fraud"; 
  • The factual bases, including the sources of those facts, for each and every allegation pleaded against a payment processor in the CFPB's complaint; and 
  • The facts that the CFPB could "reasonably identify" as "exculpatory" of a payment processor. 

The CFPB unsuccessfully objected to the 30(b)(6) depositions on the grounds that the noticed topics inquired into areas protected by the attorney work product doctrine and applicable privileges. Judge Story overruled these objections on the grounds that the noticed topics sought inquiry into factual matters, as opposed to the protected mental impressions, case strategies, and legal opinions of the CFPB's attorneys. 

Despite this ruling, as well as Judge Story's subsequent guidance, the CFPB provided 30(b)(6) witnesses for each of the payment processors' noticed depositions who were unprepared, and who responded to questions by reading (oftentimes unresponsive) written scripts for as long as 40-60 minutes at a time. The CFPB's witnesses also refused to identify any exculpatory facts, taking the position that the CFPB's extensive investigation had not yielded any exculpatory facts with respect to the payment processors.  Meanwhile, the CFPB's attorneys defending the 30(b)(6) depositions lodged frequent work product and privilege objections in an effort to prevent witnesses from answering questions about the factual bases of the CFPB's claims.

It is fair to say that these tactics infuriated Judge Story, who found that the CFPB had "blatantly" and "willfully" disregarded his repeated instructions that the CFPB's 30(b)(6) witnesses were required to answer factual questions, and found that the CFPB had "willfully" failed to present knowledgeable 30(b)(6) witnesses for each of the noticed depositions. Judge Story also characterized the CFPB's position that its extensive investigation had not yielded any exculpatory facts as reflective of a "bad faith attempt to frustrate the purposes of Defendants' depositions." As a result, Judge Story struck the counts of the CFPB's complaint against the payment processors and dismissed the payment processors from the case.


The Universal Debt Solutions order provides a useful discovery roadmap for defendants in CFPB enforcement litigations brought in federal court. Defendants may be able to leverage Judge Story's order to require the CFPB to provide knowledgeable 30(b)(6) witnesses to answer a wide range of highly relevant factual questions, including whether the CFPB has identified any exculpatory facts. The order also represents a significant, public reprimand to the CFPB, which may think twice about bringing enforcement lawsuits in federal court where the agency will be subject to robust discovery under the Federal Rules of Civil Procedure.

The Universal Debt Solutions order may also prove useful to defendants in administrative enforcement actions, where some (but not all) of the federal financial regulatory agencies permit discovery depositions. For example, the OCC allows depositions in administrative enforcement actions of "a person, including another party, who has direct knowledge of matters that are non-privileged, relevant, and material to the proceeding, and where there is need for the deposition." 12 C.F.R. § 19.170. The Universal Debt Solutions order may provide defendants in administrative enforcement actions brought by the OCC and other federal financial regulatory agencies with powerful arguments as to the wide variety of factual questions that agency witnesses should be required to answer in such depositions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Jeffrey Alberts
Events from this Firm
27 Sep 2018, Speaking Engagement, New York, United States

Pryor Cashman is pleased to host guest speaker Tom Hardin to present “Tipper X Speaks: The Dangers of Insider Trading.” Known as “Tipper X,” Tom was a young long-short hedge fund analyst who later became a key government informant in the fabled Wall Street insider trading investigation known as “Operation Perfect Hedge,” which ultimately led to more than eighty criminal cases and became the largest insider trading investigation in a generation.

9 Oct 2018, Other, New York, United States

On October 9, 2018, Jeffrey Alberts, co-head of Pryor Cashman's FinTech Group, will be a featured speaker at a Mazars-sponsored program entitled, "The Future of Financial Services: How FinTech is Transforming the Industry."

16 Oct 2018, Conference, Los Angeles, United States

On October 16, 2018, Jamice Oxley will moderate a panel at the Digital Hollywood Fall 2018 conference entitled, "The Content Development & Financing Workshop – Film – TV – Indie Production – Internet Programming."

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions