ACI Payments, a subsidiary of ACI Worldwide, reached a $20 million settlement with 44 state agencies and 50 state attorneys general Tuesday over a technical snafu that resulted in the servicer initiating withdrawals from borrower bank accounts totaling over $2.3 billion in April 2021.
Earlier this year, ACI was dinged with a $25 million fine by the Consumer Financial Protection Bureau for the same mistake.
The technical blunder impacted 480,000 mortgage holders serviced by Mr.Cooper (formerly known as Nationstar Mortgage). Roughly 100 of those impacted incurred non-sufficient funds fees from their banks as a result of ACI's error, the mortgage servicer previously said.
Apart from paying a fine for administrative costs and penalties, ACI must maintain a comprehensive enterprise risk management program and a third-party risk management program "tailored to the nature, size, complexity and risk profile of ACI," according to a statement issued by the Conference of State Bank Supervisors (CSBS), a national organization of bank regulators.
The consent order also includes a two year monitoring provision in which the servicer has agreed to regularly report to a state regulator monitoring committee to ensure compliance.
"In today's digital world, mistakes that happen at this scale can be devastating for consumers. Unfortunately, in this case, consumers paid the price for this company's lack of internal controls," said Antonio Salazar, Maryland commissioner of financial regulation and CSBS non-depository supervisory committee vice chair, in a press release. "Now that consumers have been made whole, state regulators are penalizing ACI Payments and sending a message to other companies that mishandling customer data will lead to stiff penalties."
New York will receive close to $600,000 in penalties from the settlement, per a statement issued by the state's attorney general. About 27,000 New Yorkers were impacted by the technical mistake.
"Hundreds of thousands of homeowners nationwide and thousands of New Yorkers had money wrongfully withdrawn from their accounts because of ACI's failure," said Attorney General Letitia James in a written statement Tuesday. "Companies must be more diligent when handling consumers' data and payment information to not cause worry and panic among consumers."
In reaction to the settlement, ACI Worldwide said it entered into the consent order "without admitting any wrongdoing, to avoid the expense and distraction of litigation."
"At all times during and after the April 2021 error, consumers' money and personal information remained safe," the company's press release read. " Immediately after the event, ACI adopted additional controls to prevent such errors from occurring within the Speedpay environment. ACI is satisfied with the conclusion of this matter and is moving forward in the interest of its employees, shareholders and customers."
The company expects most of the costs associated with the state money transmitter regulators and state attorneys general settlements to be covered by third parties, it said.
The error in question allegedly occurred because ACI Payments was using live customer data during an internal test of its Speedpay platform, a payment system ACI acquired from Western Union in 2019.
During its testing, ACI improperly sent large files filled with Mr. Cooper's customer data into the ACH network, unlawfully initiating electronic mortgage payment transactions from homeowners' accounts. This exposed consumers to overdraft or insufficient fund fees, CSBS said in a statement.
