On October 17, 52 state and territorial attorneys general, in addition to state money transmission regulators, entered into settlements amounting to more than $20 million with ACI Worldwide (ACI), to resolve claims involving a money transmission error that led to the unauthorized withdrawal of $2.3 billion from Nationstar Mortgage (also known as Mr. Cooper) customers.
The state regulators’ allegations stemmed from a 2021 testing error wherein ACI — at the time a third-party payment processor for Mr. Cooper — inadvertently withdrew $2.3 billion from the bank accounts of Mr. Cooper mortgage holders. The error occurred on April 23, 2021, when ACI, while testing its Speedpay payment platform, mistakenly processed live consumer data of Mr. Cooper customers. The mistake resulted in consumers being subjected to the attempted withdrawal of multiple mortgage payments from their personal bank accounts on days when payments were not authorized. Although the vast majority of withdrawals were not effectuated, 1.4 million transactions were still processed and upward of 477,000 consumers were impacted — 14,629 of which were Virginians. The withdrawals led to consumers not being able to access funds and, in some instances, incurring overdraft or insufficient funds fees.
The state regulators’ investigation into the testing error determined a key component to be “significant defects in ACI’s privacy and data security procedures and technical infrastructure related to the Speedpay platform.”
In the wake of the incident, ACI initiated corrective measures to minimize the impact on customers and was ultimately able to restore all accounts. ACI has also provided restitution to effected customers both directly, and through related settlements.
In addition to the monetary payment to the states, the settlement requires ACI to employ more stringent measures to protect consumer data and funds in the future. For example, ACI is now required to use artificially created data during system tests, rather than real customer data that may lead to nationwide consumer exposure. ACI will now also be required to isolate testing and development work from its consumer payment systems.
Deficiencies in data security protocols and infrastructure remain primary sources of risk for companies nationwide. As evidenced by this settlement, the risks posed by insufficient systems are not merely limited to data breaches or the bad actions of nefarious third-parties. Rather, companies are routinely finding themselves victim to their own mistakes and inadvertent errors. Accordingly, it is paramount that businesses and their stakeholders review and supplement their data security infrastructure to identify gaps and take appropriate measures to address any shortfalls.
Troutman Pepper State Attorneys General Team
|Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
|Clay Friedman – Co-leader
Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
Tim is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, with a primary focus on financial services litigation.
Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
Michael is an associate in the firm’s Regulatory Investigations, Strategy, and Enforcement Practice Group. Based out of the firm’s Boston office, Mike has deep experience in litigation, investigations, and other regulatory matters involving state-level regulators and state attorneys general.
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
John represents clients in a wide variety of general and complex litigation matters, shareholder disputes, products liability, and privacy claims.
Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.