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Judge Dismisses CFPB Lawsuit Against Payment Processor Intercept Corp.

A district court last Friday dealt a blow against the Consumer Financial Protection Bureau (CFPB) by dismissing the CFPB’s lawsuit against the payment processor, Intercept Corp., arguing that it failed to present sufficient evidence in the case.

The CFPB filed a lawsuit against Intercept, a North Dakota payment processor, claiming that it processed fund transfers for payday lenders in states where payday loans are illegal.

Judge Ralph Erickson of the U.S. District Court for North Dakota issued a blistering opinion criticizing the CFPB for failing to present enough evidence to file suit against Intercept.

Erickson wrote in his ruling, “Although the complaint need not contain detailed factual allegations, it must contain ‘more than an unadorned, the-defendant-unlawfully-harmed-me accusation.” He continued, “Formulaic recitations of the elements of a claim or assertions lacking factual enhancement are not sufficient. The facts alleged in the complaint must be plausible, not merely conceivable.”

The Consumer Financial Protection Bureau argued that the payment processor ignored warnings from financial institutions of possible illegal activity by clients about unauthorized debits. The agency also alleged the company and its executives did not adequately monitor or respond to consumer complaints and high return rates for insufficient funds or unauthorized charges.

Erickson also wrote in his opinion, “Although the complaint contains several allegations that Intercept engaged in or assisted in unfair acts or practices, it never pleads facts sufficient to support the legal conclusion that consumers were injured or likely to be injured.”

The Consumer Financial Protection Bureau claimed that Intercept’s executives ignored signs of potential fraud. Judge Erickson wrote that the lawsuit “does not contain sufficient factual allegations to back up its conclusory statements regarding Intercept’s allegedly unlawful acts or omissions.”

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