Justice targets payday lenders through banks
Jan. 28, 2014 – The Justice Department is looking to go after predatory payday lenders through the banks that do business with them in a program called “Operation Choke Point,” according to The New York Times.
The Justice Department has reportedly sent out subpoenas to more than 50 payment processors and the banks they do business with.
“The agency is scrutinizing banks both big and small over whether they, in exchange for handsome fees, enable businesses to illegally siphon billions of dollars from consumers’ checking accounts, according to state and federal officials briefed on the investigation,” the Times wrote.
The first action under the program was a lawsuit against Four Oaks Bank of North Carolina, which included allegations of willful ignorance regarding processing payments for payday lenders, including payments related to a Ponzi scheme. The Times predicts the program could have a “chilling” effect on payday lenders that operate online.
NAFCU will monitor the program for its impact, if any, on credit unions.
The CFPB began accepting complaints about payday loans in November. NAFCU continues to closely monitor the data the bureau collects and releases, and has raised concerns about the reputation risk that false complaints in the system could create.
The New York Times article