Last week the Federal Deposit Insurance Corporation (FDIC) reissued FIL-14-2005 “Payday Lending Programs: Revised Examination Guidance” and its attachment, “Revised Guidelines for Payday Lending,” to clarify that bankers and others are aware that it does not apply to banks offering products and services, such as deposit accounts and extensions of credit, to non-bank payday lenders.
The letter explains that financial institutions that can properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category [emphasis added] of business customers or individual customer operating in compliance with applicable state and federal laws.
This is an interesting turn of events, following a September ruling by a federal judge who determined that the Community Financial Services Association of America (CFSA) may pursue claims that the FDIC, the OCC, and the Board of Governors of the Federal Reserve have been participating in a campaign initiated by the Department of Justice to force banks to end their business relationships with payday lenders. Called “Operation Choke Point,” the campaign has been the subject of a House Committee Investigation.
The issue has also affected the ARM industry, which has reported banks dropping collection agencies as clients, citing industry risk.