Payday lenders claim they are on the verge of collapse, alleging federal regulators are pushing banks to stop doing business with short-term, high-interest loan providers.
The Community Financial Services Association of America, which represents the convenience industry, and Advance America, Cash Advance Centers Inc., one of the industry’s largest companies, have filed an emergency motion seeking a preliminary injunction against the regulators. The two want the court to block what they claim is a banking twist by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corp.
The case alleged that “leaders” of the three regulators for more than three years “had been carrying out a behind-the-scenes campaign” to convince banks to terminate their accounts with payday lenders. He said regulators “have made it clear to regulated banks that refusal to remove payday lenders will result in regulatory retaliation.”
Representatives of regulators declined to comment. Members of the agencies were questioned about such allegations at a congressional hearing in 2014. At that time, they said that as a rule, they did not tell banks who to do business with and only focused on managing banks’ exposure to potentially illegal activities. .
Whether or not they are stimulated by regulators, banks seem to have cut ties. Advance America has said in its legal file that in recent weeks five banks, including US Bancorp and BBVA Compass, have notified it that they will end their relationship with the company.