MoneyGram, sued by CFPB, accuses it of 'venue shopping'

When the Consumer Financial Protection Bureau sued MoneyGram International in April, the lawsuit was filed in New York because New York Attorney General Letitia James joined the lawsuit alleging repeat violations of remittance rules.  

But MoneyGram, which is headquartered in Dallas, is now asking a New York judge to transfer the case to Texas and in doing so, is publicly airing some of the unusual, behind-the-scenes actions taken by CFPB Director Rohit Chopra in litigation.

Chopra has previously said he expects more litigation against companies accused of wrongdoing and has focused his attention primarily on large companies that are repeat offenders.

MoneyGram alleges that the CFPB recruited New York's top cop to join the lawsuit at the last minute and that New York's attorney general conducted no investigation or had any involvement until three months before the lawsuit was filed.  

New York's attorney general "never sought documents or testimony from defendants, never issued a subpoena, and never appeared to conduct any investigation whatsoever, " MoneyGram said in court documents filed last week. 

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The company alleges that the CFPB only added James as a co-plaintiff "at the eleventh hour," in order to "bootstrap," itself into New York as a better venue. 

The New York Attorney General's office declined to comment, citing the pending litigation. 

"Generally speaking, the CFPB always sues where the company is located," said Tom Hefferon, a partner at Goodwin Procter. "Fundamentally, cases tend to end up in the place where the witnesses are located."

Some have suggested that the CFPB is seeking to avoid litigating in Texas because judges on the Fifth Circuit Court of Appeals have ruled against the bureau on several important issues including its payday rule. 

More recently a handful of Fifth Circuit judges have raised fresh questions about the bureau's constitutionality, signaling their view that the CFPB's funding through the Federal Reserve System violates the Constitution's Appropriations Clause because it happens outside the congressional appropriations process. MoneyGram also claims the CFPB's case should be dismissed "because of a fatal constitutional defect." 

"There is a legitimate reason that it makes sense for a New York attorney general to be allowed to sue in New York," Hefferon said. "But on the flip side, that could be an excuse because the CFPB might prefer to litigate in the Second Circuit versus the Fifth Circuit."

A CFPB spokeswoman said in response that "MoneyGram operates through more than a thousand locations in New York, and as alleged in our complaint, the company has spent years failing its customers and violating federal law in New York and across the country."

MoneyGram also alleged that the lawsuit should be dismissed because the violations, first uncovered between 20014 and 2016, are outside the statute of limitations. The company claims the lawsuit involved technical violations and that no consumers were harmed and refunds were only denied while the company checked for fraud.

MoneyGram accused the CFPB of shopping around for a court that would treat its claims most favorably. 

"Rather than follow its typical practice and file its complaint in MoneyGram's home district, a far more convenient and appropriate forum, the CFPB engaged in naked forum shopping by recruiting NYAG to join this case on the eve of litigation to attempt to manufacture a venue in this district," the company said in court documents. 

MoneyGram got a boost of support last week from three Republican lawmakers including Rep. Patrick McHenry of North Carolina, the ranking member of the House Financial Services Committee, who sent a letter to Chopra accusing the regulator of "conspiring" with state attorneys general. 

The lawmakers also used the term "forum shopping," and lawyers not involved in the case said that while companies generally look for the most favorable venue, regulators do not. 

"Ordinarily, when a federal agency sues a company, they almost always sue them in the federal district court where their headquarters is located," said Jeff Naimon, a partner at the Buckley law firm.

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McHenry, Rep. Blaine Luetkemeyer of Missouri and Rep. Tom Emmer of Minnesota told Chopra that Congress did not intend for the CFPB "to intimidate companies by conspiring with state agencies to pursue duplicative enforcement actions."

The CFPB is preparing for an onslaught of congressional probes next year if Republicans win in the midterm elections. Companies in the CFPB's crosshairs also have been preparing.

For the first time in years, MoneyGram revived a political action committee last year and has donated roughly $14,500 to individual lawmakers so far this year. 

The MoneyGram International PAC received a total of $35,000 from seven executives in September 2021 including from Chairman and CEO Alex Holmes, General Counsel and Corporate Secretary Robert Villasenor and Chief Financial Officer Lawrence Angelilli, and four others who each donated $5,000, according to the Federal Election Commission. 

Some expect MoneyGram to be successful in moving its venue given that recent corporate targets also have pushed back against the CFPB's choice of venue. 

Last year, Fifth Third Bancorp, the $207 billion-asset Cincinnati bank that was sued by the CFPB in 2020 over allegations that employees opened phony customer accounts, was successful in having its case moved from Chicago to Columbus, Ohio. A judge in the case noted that the existence of potential victims in a specific area "was not persuasive for venue purposes." 

MoneyGram agreed in February to sell itself to private equity firm Madison Dearborn Partners for roughly $1.8 billion. 

Brendan Pedersen contributed to this report.