In North Carolina, Four Oaks Bank has agreed to pay $1.2 million to settle accusations that it and its parent company allowed illegal activity in its accounts tied to payday lending. The proposed deal -- which still needs court approval -- requires the bank to help federal authorities in possible criminal investigations of its executives, board members, and customers.
The Justice Department's civil lawsuit alleges that, since 2009, Four Oaks has provided an unidentified third-party payment processor with direct access to the Federal Reserve Bank of Atlanta in exchange for hefty fees. Doing so allowed the processor to debit customer accounts without authorization. According to complaints, the processor allowed payday lenders to accumulate fees and interest on loans that were supposedly paid off. Bank executives also allegedly ignored a notice from the Arkansas attorney general's office that some people in that state were being charged for payday loans, although such loans are illegal there.
Four Oaks agreed to pay a $1 million civil penalty and to forfeit $200,000 to the United States Postal Inspection Service's Consumer Fraud Fund. The proposed deal also requires the bank to sever all ties to the processor within 30 days and immediately stop debiting customer accounts by that processor. The bank will be allowed to keep working with other third-party processors only after establishing that those companies do not have a history of unauthorized debits or deceptive business practices.