Government to Payday Lenders: Don?t Sue Us, Sue the Banks

August 22, 2014
Washington Business Journal 
payday lending news
Payday lenders should sue banks that refuse to take their deposits instead of suing the government, according to a group of lawyers representing the Federal Deposit Insurance Corp. (FDIC) and other bank regulators in a legal action lodged by the industry.

Alexandria, Va.-based Community Financial Services Association of America and South Carolina-based Advance America filed suit June 5 in the U.S. District Court for the District of Columbia. The complaint seeks declaratory and injunctive relief to set aside guidance documents and what it calls "other unlawful regulatory actions."

In an Aug. 18 response seeking dismissal of the suit, the government said the lenders are "misdirected" in their focus. "The banks, not federal banking regulators, terminated those business relationships," it argues, "and plaintiffs have no standing to contest the FDIC’s guidance documents cautioning banks about high-risk relationships (including, but not limited to, relationships with payday lenders)." The government also says the guidance documents cannot be challenged because they are not "final agency action."

Late in July, the FDIC said it would no longer keep a list of risky businesses, including payday lenders, that banks should monitor closely in transactions. This seems to be a relaxation of the government's anti-fraud campaign known as "Operation Choke Point."

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