Company: IIIV
Filing Date: 2025-11-21
Form Type: 10-K
Source: 0001728688-25-000122
Chunk: 62

Company: i3 Verticals, Inc.
Filing Date: 2025-11-21
Form: 10-K
Item: Item 1A
Chunk 62
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 and results of operations. In addition, even an inadvertent failure to comply with laws and regulations, as well as rapidly evolving social expectations of corporate fairness, could damage our business or our reputation.

31

Compliance with the Dodd-Frank Act and other federal and state regulations applicable to our business may increase our compliance costs, limit our revenues and otherwise negatively affect our business.

Since the enactment of the Dodd-Frank Act, there have been substantial reforms to the supervision and operation of the financial services industry, including numerous new regulations that have imposed additional compliance costs and, in some cases, limited revenue sources for us and our financial institution partners and customers. Among other things, the Dodd-Frank Act established the CFPB, which is empowered to conduct rule-making and supervision related to, and enforcement of, federal consumer financial protection laws. The CFPB has issued guidance that applies to “supervised service providers,” which the CFPB has defined to include service providers, like us, to CFPB supervised banks and nonbanks.

In that regard the CFPB July 25, 2024 report entitled The Cost of Electronic Payments in K-12 Schools, the report included discussion on the CFPB’s Fall 2023 edition of their Supervisory Highlights report and a 2014 USDA Policy Memorandum regarding school lunch fees. The CFPB report concluded that certain payment processing practices utilized by the Company and other participants in our industry may violate consumer financial protection laws.

The appearance of being involved in unfair trade practices and violating consumer protection laws when offering payment processing services to our customers could harm our reputation with our customers. Further, compliance with emerging sector-specific regulations may negatively impact our business, financial condition and results of operations by requiring us to alter our fee structure or payment processing practices. 

The CFPB's focus on these payment processing practices has led to litigation against the Company. For example, on May 16, 2025, Suzanne Hess, individually and on behalf of a putative class of citizens of the State of New York, filed a class action compliant in the Supreme Court of the State of New York, Nassau County, against i3 Verticals, LLC and CP-DBS, LLC d/b/a “PaySchools”, a subsidiary of i3 Verticals, LLC, seeking monetary damages and injunctive relief related to services offered by PaySchools that enable parents, guardians and caregivers to fund lunches for students in certain New York school districts and allegedly unlawful practices by PaySchools related to the fees