48 States Settle with Payment Processor Over Unauthorized Withdrawal Claims for $10 Million

On October 17, 2023, the California Attorney General announced that 48 states, Washington D.C., and Puerto Rico had reached a $10 million settlement with a payment processing company related to allegations of attempted unauthorized withdrawals related to a testing error on the part of the processing company.

According to the press release, during internal testing, a processing company “erroneously initiated Automated Clearing House (ACH) transactions to withdraw unscheduled mortgage payments from nearly 480,000” borrowers of a single mortgage company.

The state attorneys general asserted that the erroneous transfer attempts were a result of defects in the processing company’s privacy and data security and technical infrastructure. ​

As part of the settlement, the processing company agreed to pay $10 million in penalties to the state attorneys general, take steps to avoid future incidents such as using artificial customer data in system tests, and segregate any development and testing work from its computer payment systems.