By: Linda L. Goodman
In a case that dates back to 2014, the FDIC announced that they have settled a D.C. federal court lawsuit by payday lenders that accused banking agencies of illegally pressuring banks to cut ties with payday lenders by using back-room pressure tactics and threatening banks with harsher exams and lower supervisory ratings if they kept serving payday lenders. The payday lenders also accused the agencies of violating their due process rights.
The banking agencies initiative program, initiated by the U.S. Department of Justice, was known as “Operation Choke Point”. The FDIC said that this operation allowed employees to act in a manner inconsistent with the policies of the FDIC and that the conduct created misconceptions about the FDIC’s policies. The original intention of the DOJ program was to stop bad actors from accessing the U.S. banking system. Ultimately, it affected payday lenders, gun shops and other legal but politically disfavored businesses from being able to access banking services. The DOJ announced in August of 2017 that it had closed all cases in relation to the operation and that the initiative was no longer in effect.
The FDIC said it was issuing a statement that outlines its internal policies for recommending a bank to pull the plug on a customer’s deposit account and to reiterate past guidance on providing banking services and meeting federal anti-money laundering requirements.
Additionally, the FDIC sent a letter to the lenders stating that the FDIC has a policy of not prohibiting or discouraging banks from serving law-abiding customers. The agency said they will no longer be distributing lists of higher-risk types of merchants. The agency also is pledging to provide additional training for its examiners by the end of the year.
According to the press release, the FDIC stated that No FDIC policy or guidance is changing as part of the settlement. All the existing rules and guidance remain in full force and effect.
The payday lenders involved in the lawsuit are pleased with the actions of the FDIC. The remaining parties are continuing the settlement process.
This announcement is good news for the payday lending industry.
For more information about this case in the U.S. District Court for the District of Columbia: Community Financial Services Association of America Ltd. Et al. v. Federal Deposit Insurance Corp. et al., Case Number: 1:14-cv-00953.
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This article is a publication of The Goodman Law Firm and is intended to provide information on recent legal developments. This article does not create an attorney-client relationship, nor should it be construed as legal advice or an opinion on specific situations. This may constitute “Attorney Advertising” under the Rules of Professional Conduct and under the law of other jurisdictions.
Linda L. Goodman is the founder of The Goodman Law Firm, concentrating its practice in internet business and law. Her firm’s clients include Advertisers, Affiliates, Affiliate Networks, and ISP’s.
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