DOJ Defends Payday Lender Probe

January 30, 2014
Wall Street Journal Online 
payday lending news
In recent correspondence to trade groups and legislators, the Department of Justice (DOJ) stressed that its ongoing probe into banks and other providers that facilitate payment-processing services to payday lenders and other merchants accused of fraud is not looking at banks that work with law-abiding businesses. "We want to protect the public from mass-market consumer fraud by holding accountable those banks and payment processors that violate federal law by facilitating fraudulent transactions,” Peter Kadzik, principal deputy assistant attorney general, wrote in a letter to Reps. Blaine Luetkemeyer (R-Mo.) and Kevin Yoder (R-Kan.).

The DOJ has faced criticism from legislators and banking groups over the agency's investigation. Rep. Darrell Issa (R-Calif.) this month said the government was abusing its authority by demanding banks cease doing business with certain companies. The probe focuses on the relationships that banks and payment processors have with a slew of merchants, including payday lenders, debt-relief services, and telemarketing operations, that generate high volume of consumer complaints over alleged fraud. CFPB director Richard Cordray told a House panel that online lenders who obey the rules "deserve protection against online lenders that are undercutting them, violating the law" and "not complying with the same requirements."

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