GOP lawmakers to Holder: Lay off online lenders
A group of GOP congressmen blasted Eric Holder’s Department of Justice on Friday for “intimidating” banks into terminating business arrangements with certain online lenders.
Thirty-one Republican lawmakers sent a letter to Attorney General Holder and the head of the Federal Deposit Insurance Corporation (FDIC) that accused their two agencies of smothering access to short-term, high-interest loans purchased online, The Wall Street Journal reports.
Led by Missouri Rep. Blaine Luetkemeyer, the group says that federal regulators are “intimidating some community banks and third party payment processors with threats of heightened regulatory scrutiny unless they cease doing business with online lenders.”
By targeting the banks and payment services online lenders work with every day, regulators “eliminate the basic processing services that legitimate lenders rely upon to serve millions of Americans.”
“More than one in four American households conducts some or all of their financial transactions outside the mainstream banking system,” the letter notes, arguing that poor families who use payday loans are most likely to suffer from the crackdown.
“Your actions to ‘choke-off’ short-term lenders by changing the structure of the financial system are outside of your federal mandate,” the lawmakers added, calling on the federal agencies to halt their enforcement actions.
The DOJ and FDIC did not respond to requests for comment.
Both state and federal governments have cracked down on the practice of offering short-term payday loans online, with regulators typically saying the exorbitant interest rates charged far exceed statutory limits.
Earlier this month, the DOJ sent subpoenas to banks and other financial institutions that handle transactions for online payday lenders and other financial businesses.
“We are changing structures within the financial system that allow all kinds of fraudulent merchants to operate,” A DOJ official said at the time, adding that the department planned on “choking them off from the very air they need to survive.”
Also in early August, New York’s top financial regulator, Ben Lawsky, sent cease-and-desist letters to over 100 online payday lenders, including some owned directly by western and midwestern Native American tribes.
Last week two of the federally-recognized tribes sued Lawsky for violating their tribal sovereignty, and on Monday a federal judge expedited the case after Native American advocates claimed their tribes would be “devastated” if Lawsky was allowed to “stall this case and run out the clock.”
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