Jim Flynn

Jim Flynn, Money & the Law

The Consumer Financial Protection Bureau, newly invigorated under the Biden administration, is back in court.

The federal agency is fling more lawsuits against companies whose activities are harmful to consumers — that is, ordinary folks purchasing goods and services for a personal, family or household purpose.

A recent such action, brought in federal court in Illinois, involves a company called BrightSpeed Solutions Inc. and its owner, president and apparent chief bad guy, Kevin Howard.

By way of background, the CFPB figured out several years ago — back in the Obama days — that an effective strategy for fighting consumer fraud was to go after not just the fraudsters but also third parties facilitating the movement of money from duped consumers to the fraudsters’ bank accounts. And that’s what the CFPB alleges BrightSpeed Solutions was up to.

Per the CFPB’s complaint, BrightSpeed’s business model was to buddy up to companies — and there were more than 100 of them — using telemarketing to sell fraudulent computer repair and support services. (“ALERT — your computer has been infected by a virus. For only $1,200 we can fix that.”) Once a defrauded customer bit, the customer was instructed to pay for the wholly unnecessary services being purchased by authorizing a “remotely created draft.”

A remotely created draft involves giving the payee of the draft (in this case, the fraudster) the name of your bank, your checking account number and the routing number of your bank, all of which are printed on the front of your checks. The payee (the fraudster) then creates the equivalent of a regular paper check and deposits it in their bank. As with a regular check, after the deposit is made, the payee’s bank sends the draft on to the defrauded person’s bank for payment out of their account.

BrightSpeed facilitated the fraudsters’ use of these remotely created drafts — to the tune of $71 million — by convincing a couple of banks that the payments being made with the drafts were legitimate, and to accept the drafts for deposit without asking many questions. BrightSpeed found its market niche among the fraudsters by its willingness to do what legitimate payment processing companies were unwilling to do, for which it was paid a handsome fee.

It’s a little hard to tell where the CFPB’s lawsuit might be headed. Kevin Howard shut down BrightSpeed in 2019 after he could no longer find banks willing to accept for deposit the remotely created drafts being generated by the fraudsters. Therefore, the CFPB’s request for an injunction (an order prohibiting further wrongful conduct) would seem to be meaningless.

However, the CFPB is also seeking damages, redress to consumers, “disgorgement of ill-gotten gains” and a civil penalty, so maybe Kevin Howard has a stash of money somewhere the CFPB can get its hands on.

Jim Flynn is with the Colorado Springs firm of Flynn & Wright LLC. Email moneylaw@jtflynn.com.

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