Yesterday, the CFPB announced that it had filed a lawsuit against “the ringleaders of a robo-call phantom debt collection operation, their companies, and their service providers.”  This is the same lawsuit filed in federal district court in Atlanta that we blogged about on Monday, and as we indicated, the service providers named as defendants included payment processors that processed credit card and debit transactions for the debt collectors.  The complaint alleges that the debt collectors’ scheme depended on the participation of the payment processors that allowed the collectors to access consumers’ bank accounts.

In naming the payment processors as defendants, the CFPB’s action resembles “Operation Choke Point,” the coordinated federal multiagency enforcement initiative targeting banks serving online payday lenders and other target companies that have raised regulatory or “reputational” concerns.  “Operation Choke Point” has tried to reach payment processors by taking action against the banks with whom the processors had customer relationships and claiming that the banks overlooked warning signs of fraud in the transactions handled by the processors.  In its new lawsuit, the CFPB also seeks to reach payment processors but does so by directly naming them as defendants and charging the payment processors themselves with ignoring warning signs of fraud.

The CFPB’s direct assault on payment processors is likely to lead to increased scrutiny by banks of their relationships with payment processors and demonstrates the need for processors to conduct heightened due diligence to ensure that the businesses to whom they provide services are in compliance with applicable federal and state law.