Federal regulators should take immediate action to stop unaffordable, high-cost payday lending by banks. That is the key message from more than 260 groups and individuals in a letter to the heads of the Federal Reserve Board, the FDIC, the OCC and the CFPB. This is a follow-up letter from the same request that was submitted in a similar letter the previous year. The groups say, “We are concerned that a year has passed without decisive regulatory action, so we write to renew our call.”

Banks that do payday lending (a.k.a. "Direct Deposit Advances") are engaging in risky behavior. This legal brief offers legal precedents and shows why banking regulators responsible for monitoring banks' safety and soundness should not allow payday lending by depository institutions.

On February 23, the New York Times published an article describing how some banks enable Internet payday lending. In this brief, CRL provides additional legal context to supplement that article. Bottom line: We need to continue passing state laws that provide strong enforcement tools, and federal regulators need to use their full authority to stop predatory payday loans.

Five U.S. Senators have asked the OCC, the FDIC and the Federal Reserve to stop the banks under their respective jurisdictions from making predatory payday loans. At least four big banks have started making the triple-digit interest loans, which are virtually identical to the predatory payday loans that trap borrowers in long-term, high-cost harmful debt.

CRL urges the NCUA to structure their Payday Alternatives Loan (PAL) program to reflect the broad range of alternatives, to prevent the program from operating like a series of high-cost payday loans and to prevent credit unions from engaging in payday lending outside of the PAL program.