The international money transfer company MoneyGram harmed customers by delaying transfers and failing to properly investigate and fix transfer errors, according to a lawsuit filed Thursday by the Consumer Financial Protection Bureau and New York’s attorney general.
The suit accuses MoneyGram of repeatedly flouting a variety of consumer protection laws and failing to correct problems identified by regulators. Officials at the consumer bureau did not say specifically how many customers they believe were harmed, but they pointed to MoneyGram’s broad reach: The company transmits around $100 billion a year for some 47 million customers in 200 countries.
Immigrant workers often rely on MoneyGram and its competitors to send money to relatives back home. “Consumers deserve to know where their money went,” Letitia James, New York’s attorney general, said in a statement. “Companies have an obligation to be transparent with consumers, treat them fairly and follow the law, but MoneyGram repeatedly failed to do so.”
MoneyGram, in a written statement, called the lawsuit “frivolous.” The company has invested heavily “to build a best-in-class compliance program with record-low anti-fraud numbers designed to protect consumers against harm,” it said.
Rohit Chopra, the consumer bureau’s director, cast MoneyGram’s actions as part of a pattern of misdeeds. The company paid $18 million in 2009 to settle fraud charges brought by the Federal Trade Commission, and paid $125 million in 2018 to settle charges that it had violated its earlier agreement with the commission and a 2012 deal with the Justice Department regarding its anti-fraud measures.
“I am committed to stamping out misconduct by firms that break the law over and over again,” Mr. Chopra said, echoing points he made in a speech last month calling for stiffer penalties for repeat offenders.
In a regulatory filing in February, the company said it was in settlement talks with the consumer bureau and had set aside $7.5 million to cover the likely cost of a deal. Bureau officials declined to comment on Thursday on those talks.
MoneyGram said Mr. Chopra and his employees had “entered into discussions with closed minds and unfortunately chose to make increasingly unjustifiable and unprecedented demands.”
The lawsuit, filed in federal court in Manhattan, said MoneyGram unnecessarily delayed transactions, failed to make required fee refunds when it did not complete a transfer on time and did not properly investigate and respond to complaints about remittance errors. Some of the delays related to MoneyGram’s process for screening transfers for signs of money laundering or other illegal acts, according to the lawsuit.
MoneyGram is being acquired by Madison Dearborn Partners, a Chicago-based private equity firm, for $1.8 billion in cash. Pending regulatory approvals, MoneyGram said, it expects the deal to close by the end of the year.
