Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors disclosed in Item 1A of our Form 10-K for the fiscal year ended December 31, 2020, other than as described below. Additional risks and uncertainties, including risks and uncertainties not presently known to us, or that we currently deem immaterial, could also have an adverse effect on our business, financial condition and/or results of operations.
Our software products may contain undetected defects, or errors may occur when our services are provided, which could damage our reputation with customers, decrease profitability, and expose us to liability.
Our software products are complex. Software may contain bugs or defects that could unexpectedly interfere with the operation of the software products when first introduced or as new versions are released. Additionally, errors could occur during our provision of services, including processing services such as our bill payment services and other services delivered through the ACI On Demand platform. Software defects or service errors may result in the loss of, or delay in, market acceptance of our products and services and a corresponding loss of sales or revenues.
Customers depend upon our products and services for mission-critical applications, and product defects or service errors may hurt our reputation with customers. In addition, software product defects or errors could subject us to liability for damages, performance and warranty claims, and fines or penalties from governmental authorities, which could be material.
For example, in April 2021, ACH files associated with one of our mortgage servicing customers were inadvertently transmitted to a processing bank during a test of our ACH file production system. Reversal ACH files were promptly issued, restoring affected accounts. We have been contacted by the U.S. Consumer Finance Protection Bureau and various state consumer protection and regulatory agencies about this incident, and are cooperating in their investigations, which could result in fines or penalties that could be material.
We have also been named as a defendant in seven class action lawsuits filed in various federal courts purportedly on behalf of consumers whose mortgage accounts were affected. The complaints vary, but generally allege violations of federal and state consumer protection and other laws and claim that we are obligated to pay statutory and other damages. We intend to vigorously defend these cases. Defending such cases could be time-consuming and costly, and our failure to successfully defend ourselves in any or all of these cases could materially affect us.
We have a few new members on our senior management team, which coupled with the announced strategy to realign our organization structure and geographic footprint, may pose challenges to our operations as we transition to the new business model.
As a result of our Fit for Growth strategy which includes a realignment of our organizational structure and geographic footprint, we may experience personnel changes. We may face difficulties finding comparably experienced replacement employees exacerbated by the remaining impact of the COVID-19 pandemic and especially many employees continued remote working situation. Failure to meet these challenges successfully may have a material adverse effect on us.
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