Maryland's financial regulator is trying to stop illegal online payday loans by dogging the banks that help make the advances possible. "Without the payday lender's bank, the payday lender can't operate in my state," reasons Mark Kaufman, commissioner with the state's division of financial regulation. "They are the entry point into the system. Without them, none of this works."
The payday lenders being targeted operate online, beyond the reach of state regulators; so authorities in Maryland, New York, and other states that restrict payday lending are training their scrutiny instead on the traditional banks that aid online lenders. "This is a new tack that states are taking," notes Alex Horowitz of the Pew Charitable Trusts.