The Consumer Financial Protection Bureau and the Attorney General of New York sued payments company MoneyGram International Inc.
MGI,
Thursday for allegedly breaking consumer protection laws that require remittance companies to disclose price and timing information about money transfers and for failing to make remittances available to recipients in a timely matter.
The complaint, filed federal court in the Southern District of New York, alleges that MoneyGram repeatedly violated provisions of a 2010 law that created legal protections for senders of and receivers of remittance transfers, and which the CFPB enforces through its Remittance Rule.
CFPB Director Rohit Chopra told reporters at virtual press conference that his agency was suing MoneyGram “because it has not been following the law despite repeated warnings.”
“For years MoneyGram has been leaving families high and dry while they wait for their money,” he said. “MoneyGram illegally held up funds, leaving its customers stranded when their money didn’t arrive on their time.”
The lawsuit also alleges that the CFPB uncovered violations of the law during supervisory examinations of the company between 2014 and 2016 and that the regulator gave the company an opportunity to correct the problems before it pursued formal penalties.
The action follows a series of settlements MoneyGram made with federal authorities, including a 2009 settlement in which the company agreed to pay $18 million to settle fraud charges with the Federal Trade Commission and a $125 million settlement with that agency for failing to follow an FTC fraud-prevention order that accompanied the previous agreement.
In 2012 MoneyGram agreed to forfeit $100 million to the Department of Justice in a deferred prosecution agreement after it admitted to “aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program.”
MoneyGram didn’t immediately respond to a request for comment on the lawsuit.
The news follows a Feb. 15 announcement that the company had agreed to be acquired by private-equity firm Madison Dearborn Partners LLC in a cash deal valued at $1.8 billion. The agreement to pay investors $11.00 for each share of the company represented a 22.9% premium to the previous day’s closing price.
The deal had been expected to close in the fourth quarter of 2022, though it remains subject to regulatory approvals. Shares of the company were down more than 5.5% following the news Thursday.
This post was originally published on Market Watch
