By Charles Lane
Four additional banks have agreed to block online payday lenders from accessing customer accounts in New York. The agreement comes as the banks’ processing network remains silent on efforts to keep the illegal loans from crossing state borders.
Payday lending is generally illegal in New York and Connecticut because the loans, which can be as high as 500 percent, exceed both states’ cap on allowable interest.
However, investigators in New York have received complaints that payday lenders are making these loans online.
The Department of Financial Services created a database of all these lenders and banks are voluntarily agreeing to not process their transactions.
The banks signing on to the agreement Thursday are Citibank, JPMorgan Chase, M&T Bank, and Valley National Bank. Bank of America agreed earlier this year.
“Two of these are some of the country’s largest banks so it’s really, really huge what the Department of Financial Services is doing,” Sarah Ludwig, Executive Director of New Economy Project, said.
DFS has urged the organization in charge of electronic payments, NACHA, to come up with a way to halt payday lenders from even accessing the network. So far they have not. NACHA did not returns calls for comment.