On June 10, 2014, Independent Resources Network Corp., doing business as IRN Payment Systems (IRN), a payment processing company, “agreed to pay or relinquish $1.1 million to settle Federal Trade Commission charges under the Telemarketing Sales Rule (TSR) that it knowingly assisted and facilitated a credit card interest rate reduction scam costing consumers nearly $10 million.” The case began in January 2013, when the FTC filed a complaint naming Innovative Wealth Builders, Inc. (IWB) and its principals, who “falsely promised consumers that they could reduce the interest rates on their credit cards and save them thousands of dollars on their debts.” The original complaint alleged that IWB operated the scam and IRN functioned as its “exclusive payment processor.” However, five months later in June 2013, the FTC amended the complaint alleging that “IRN facilitated IWB’s scheme when IRN knew, or consciously avoided knowing, key facts about the illegal conduct of IWB’s telemarketing scam in violation of the TSR, and chose to continue profiting from processing IWB’s credit card transactions.” The amended complaint detailed the depth of knowledge IRN, the payment processor, had of IWB’s exchange with consumers in association with credit cards, products and services, and the costs associated with each payment transaction the merchant processed. Key takeaways from the complaint and other FTC developments: businesses should invest in basic due diligence to determine the risk level and credibility of a prospective customer (KYC and their customers (KYCC)), diligently investigating and remedying findings under the TSR rule. This action underscores heightened pressure the FTC is taking in respect to deterring TSR violations associated with telemarketing.
Consumer Financial Protect Bureau (CFPB)
On June 11, 2014, the CFPB announced it is seeking information on how consumers use mobile financial services to access products and services, particularly for economically vulnerable consumers. The official request was published in the Federal Register, entitled “Request for Information Regarding the Use of Mobile Financial Services by Consumers and Its Potential for Improving the Financial Lives of Economically Vulnerable Consumers,” on June 12, 2014. The CFPB plans to use the information to inform and develop consumer education and empowerment strategies with respect to mobile banking services and mobile financial management services. The House Committee on Financial Services has expressed concern with decreased consumer choice as a result of government regulation, and a study recently found that Dodd-Frank may have a disproportionate effect on rural communities. The CFPB also published tips on how consumers can better protect themselves when using mobile devices for financial transactions. Comments on the Request for Information must be received by the CFPB on or before September 10, 2014.
On June 13, 2014, Nacha Government Relations attended the Senate Judiciary Committee's briefing entitled, “The Role of Payment Processors and Originating Banks in Facilitating Illegal Payments.” Panelists included: Lauren Saunders, National Consumer Law Center; Julie Nepveu and Mary Wallace, AARP; Tom Feltner, Consumer Federation of America; and Howard Langer, Langer, Grogan & Diver. The briefing focused on how banks can prevent illegal activity and how the Justice Department's Operation Chokepoint and government regulators are working to keep the payment system safe. AARP described consumer abuse cases, while NCLC underscored the operational role banks play as intermediaries for users. CFA provided a general overview on how data thieves, scammers, unlicensed payday lenders, and money launderers all rely on a bank and the payment system to debit funds from consumers' accounts and move money around. Attorney Langer concluded the briefing explaining bank fraud cases related to Wachovia and Zions, stating that both hinged on third-party account relationships. Nacha learned that no other hearings are scheduled at this time, which likely indicates that until funding bills are completed for FY2015, no further investigation is expected from Judiciary Committee staff.
On June 12, 2014, Nacha Government Relations attended the Financial Services Roundtable (FSR) “Open House” to cap off its rebrand and reorganization, with more than 300 financial services executives, DC influencers, members of Congress and Capitol Hill staff. Under the leadership of Gov. Tim Pawlenty, the FSR has undergone a major reorganization over the past year, bringing on top Capitol Hill and industry leaders to fill its lobbying, communications and policy shops.
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