Bank of Montreal’s BMO Harris Bank is one of the companies being sued in class-action lawsuits by consumers in Maryland and Pennsylvania. The plaintiffs are accusing the banks of colluding with payday lenders.
BMO Harris and other banks allow out-of-state lenders to access an electronic processing system used to credit and debit consumer checking accounts, according to the complaints. The banks “knew they were crediting and debiting consumers’ accounts for unlawful purposes,” according to the grievances filed by Patricia Booth from Garnet Valley, Pa., and Jacinta Elder of Chevy Chase, Md.
The Justice Department and Federal Deposit Insurance Corp. are encouraging banks not to allow online payday lenders to use this electronic system. Online lenders usually require that borrowers authorize the lender to take direct debits from their bank accounts to repay the loans. The complaints note that some of the interest rates on these loans can top 500 percent, while at least 13 states have banned payday loans or capped their interest rates.
Paul Deegan, a spokesman for Bank of Montreal, says the complaints "have no merit."