Cross River Bank has dropped its lawsuit against Fiserv’s First Data Merchant Services unit over the payment processor’s alleged attempt to escape its contractual obligations of nearly $4 million in commissions.

The voluntary dismissal notice filed in the U.S. District Court for the Eastern District of New York on Friday did not explain why Cross River dismissed the lawsuit, nor did it provide any details about any settlement the two parties reached that led to the decision.

The Fort Lee, New Jersey-based lender said after a settlement conference in June that it needed more time to think about First Data’s final offer.

In October of 2023, Cross River sued First Data in a New York state court. The lawsuit was later moved to a federal court the following month.

“This case presents a set of facts as straightforward as it is (regrettably) familiar: one party’s attempt to wriggle out of a contract early by making spurious allegations of breach,” the lawsuit said. The party that is trying to wriggle out is First Data, according to the November 2023 lawsuit.

Fiserv completed an acquisition of First Data in 2019. A spokesperson for Fiserv said the company does not comment on litigation.

Cross River did not return Banking Dive’s repeated requests for comment.   

The roughly $9 billion asset lender has over 500 employees and is the country's second-largest paycheck protection program provider. 

In 2018, First Data entered into a referral solutions agreement with Cross River, which provides its clients – including global firms and regional fintech startups – with banking services, compliance infrastructure, and risk management services.

Under the agreement, Cross River agreed to “actively promote” First Data’s services to its customers. At the same time, the payments processing company said it would pay the lender monthly commissions based on the profits it generated from Cross River customers who ended up using First Data’s services because of the bank’s referrals.

There was no guarantee that Cross River customers would end up using First Data’s services and that First Data would pay minimum commissions to Cross River — if none of Cross River’s customers became First Data users, First Data would not pay any commission to the lender.

As Cross River promoted First Data’s payment services to its clients, the efforts “paid off handsomely” for First Data, leading the payment service firm to develop a longstanding relationship with Coinbase, one of the largest digital asset exchanges, Cross River’s lawsuit claimed.

However, in May last year, First Data decided to terminate the agreement within 30 days for “good cause,” which would give it the leeway to avoid paying any future obligations after the 30-day period and save it from paying 17 months of commission or roughly $4 million, Cross River contended in the lawsuit.

First Data did not provide any facts in the lawsuit to support its assertion that “the prospective leads generated by [Cross River] under the Agreement do not meet [its] obligations thereunder to ‘actively promote the Payment Services’ and to provide First Data with ‘contact information for those business that indicate to [First Data] their interest in Payment Services[.]’”

In May 2023, the FDIC ordered Cross River to address its “unsafe and unsound” practices related to fair lending laws and regulations, according to a consent order. The order prohibited the lender from entering into new partnerships with third parties or offering new credit products without the FDIC’s approval. Cross River neither admitted nor denied the charges.

More than a year later, Cross River appointed three new board members to help strengthen its capabilities in specific areas, including risk management, data, technology, and corporate governance, Gilles Gade, founder, CEO, and chairman of Cross River, told Banking Dive in August.

On the same day Cross River dropped the First Data lawsuit, the lender announced that its commercial banking group closed over $1 billion in commercial real estate financing over the past year.

By Rajashree Chakravarty on Nov 7, 2024
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