Monday, June 16, 2014

Bank of America joins NY effort to stop payday lending

Bank of America has become the first financial institution to use a tool developed by a New York regulator to crack down on online payday lending in that state, officials announced Monday.

The tool, created by the New York Department of Financial Services, is a database of companies that have faced actions from the department based on evidence of payday lending, the department said. Payday lending in all forms, including online, is illegal in New York.

The Charlotte-based bank will use the tool to identify and stop online payday lending in New York, in the latest move by officials in that state to do something about short-term lending over the Internet. A press release from the Department of Financial Services says Bank of America will use the database to, among other things, identify companies that might be involved in illegal lending.

Nationwide, the online payday lending industry has been under scrutiny by regulators, who say such lenders are attempting to skirt state bans on payday lending by offering loans over the Internet. As regulators across the country increasingly crack down on payday lenders, big banks that finance those businesses have also come under scrutiny.

"Our administration is continuing to aggressively combat online payday lending, and today we are urging the private sector to join us in protecting New Yorkers from this illegal activity," New York Governor Andrew Cuomo said in a statement. "I applaud Bank of America for stepping up as an industry leader in this area and doing the right thing to help safeguard New York’s consumers."

In an email to the Observer, Bank of America spokeswoman Anne Pace said the New York initiative provides the bank with another tool to help protect its customers from predatory lending practices in New York. The bank will use the database to spot and manage potentially problematic activity affecting customers who have deposits in the bank, she said.

Payday loan businesses are banned in North Carolina, but state officials say that hasn't prevented the products from being offered here.

Late last year, North Carolina Attorney General Roy Cooper filed suit against South Dakota-based payday lender Western Sky. In filing the suit, Cooper said more than 100 complaints had been logged with his office about the company.