Mortgage servicer Nationstar, doing business as Mr. Cooper, has filed a lawsuit against electronic payment processing vendor ACI Payments related to the damages it allegedly suffered from unauthorized mortgage payments imposed on its customers two years ago.
In June, ACI Worldwide and one of its subsidiaries, ACI Payments, agreed to pay a $25 million civil penalty, without admitting any wrongdoing, for illegally processing $2.3 billion from nearly 500,000 homeowners serviced by Mr. Cooper, per a Consumer Financial Protection Bureau (CFPB) consent order. ACI also settled a consumer class action arising from the error in May.
Mr. Cooper filed the lawsuit against ACI Payments in a U.S. district court in Texas on Sept. 19.
Mr. Cooper says that on or about April 23, 2021, ACI and/or its agents sent instructions to depository institutions of its customers that initiated ACH [automatic clearing house] debits for multiple monthly mortgage payments without the servicer’s knowledge or authorization.
The plaintiff states that the ACI Payments “misused” Mr Cooper’s nonpublic personal customer information to conduct quality assurance testing, even though the servicer did not authorize such use. The tests were conducted in a “live production environment, instead of a walled-off testing environment,” according to the lawsuit.
Mr. Cooper alleges the incident made media headlines nationwide, damaging its reputation. In addition, it resulted in legal fees due to 10 class actions and at least two individual lawsuits.
Some customers faced overdrafts and/or insufficient funds fees on their bank accounts, while other customers’ depository institutions placed temporary account freezes. The servicer said it had costs related to customer payments related to their claims and complaints arising from the incident.
Mr. Cooper filed a lawsuit for contractual indemnification and breach of contract, misappropriation of confidential information, tortious interference with existing and prospective business relationships, ordinary negligence, and gross negligence, among others.
A spokesperson for Mr. Cooper said the company no longer uses ACI Payments services and wouldn’t comment on the lawsuit. A representative at ACI Payments did not respond to a request for comments.
In response to the CFPB consent order, ACI said it consented “without admitting any wrongdoing to avoid the expense and distraction of litigation.” Meanwhile, Mr. Cooper said it’s “aligned with the agency’s approach.”
According to the CFPB, ACI Payments conducted tests of its platform in April 2021. Instead of using deidentified or dummy data, it used actual consumer data from Mr. Cooper’s clients, such as names and bank account details.
In total, ACI initiated around 1.4 million ACH withdrawals. About 7,300 borrowers had their available balances reduced by more than $10,000 overnight, the CFPB said.
“The CFPB’s investigation found that ACI perpetrated the 2021 Mr. Cooper mortgage fiasco that impacted homeowners across the country,” CFPB director Rohit Chopra said in a statement. “While borrower accounts have now been fixed, we are penalizing ACI for its unlawful actions that created headaches for hundreds of thousands of borrowers.”