Dive Brief:
- State regulators and state attorneys general this week announced a collective $20 million in settlements with ACI Worldwide over a $2 billion error by the payments software provider. The 2021 mishap stemmed from unauthorized withdrawals, and attempted withdrawals, from mortgage-holders’ accounts.
- Financial regulators for 44 states imposed $10 million in fines as part of their multi-state settlement after an enforcement action led by Arkansas, Connecticut, Maryland and Texas, with support from the Conference of State Bank Supervisors, according to one of the releases, from Illinois AG Kwame Raoul. All 50 AGs reached a separate $10 million settlement with the Coral Gables, Florida-based company.
- Overall, 477,000 consumers were affected nationwide in 1.7 million faulty transactions, with $2.3 billion in withdrawals attempted, said a Tuesday press release from Ohio Attorney General Dave Yost that was similar to releases from other states.
Dive Insight:
In April 2021, ACI Worldwide was acting as a third-party payment processor for Nationstar Mortgage, also known as Mr. Cooper, among other lenders. When ACI ran a test for the mortgage company, using its Speedpay platform, the processor mistakenly withdrew, or tried to withdraw, mortgage payments from Mr. Cooper customer bank accounts without their authorization, the Ohio AG explained.
Though ACI Worldwide was able to stop or reverse some of the withdrawals after the testing mishap occurred, some consumers either couldn’t access their funds or were charged overdraft fees from the unauthorized withdrawals, according to a press release from Pennsylvania Attorney General Michelle Henry. The company has paid restitution to consumers, that AG noted.
“We are holding ACI accountable for its massive payment processing error, which caused consumers to incur overdraft and other fees, and emotional distress caused by losing hard-earned dollars through no fault of their own,” Henry said in that state’s release on Tuesday. “The significant penalties ACI is paying sends a strong message to the industry: treat customer data with great care and never use customer data to conduct tests unless there are no reasonable alternatives.”
The state attorneys general settlements follow a previous settlement ACI reached with the Consumer Financial Protection Bureau in June regarding the April 2021 testing mistake. The agency said that ACI Worldwide violated federal consumer protection laws, including the Consumer Financial Protection Act and the Electronic Fund Transfer Act, because it illegally initiated bank account withdrawals and mishandled sensitive customer data, according to the CFPB’s June press release.
As part of the CFPB settlement announced in June, the agency ordered ACI to implement reasonable information security practices, obtain permission before initiating withdrawals and pay $25 million in penalties.
“At one bank, for example, more than 60,000 accounts experienced more than $330 million in combined unlawful debits by that morning,” the CFPB said in its June release. “Among these account holders, approximately 7,300 had their available balances reduced by more than $10,000—overnight.”
Ahead of that hefty federal fine, ACI last November ousted its CEO, Odilon Almeida. In May of this year, the company named Thomas Warsop as its new CEO. Warsop, who was formerly ACI’s board chairman, had acted as the interim CEO after Almeida’s exit.
