Despite the fact that payday lending is illegal in many states, it is still alive and well. Some lenders remain undetected by establishing online businesses. Consequently, New York has compiled a database for banks to use to help spot illegal payday lenders. Bank of America is the first to take part in this effort.
New York Governor Andrew Cuomo has announced that the state’s Department of Financial Services now has a database of companies that have allegedly been tied to making illegal payday loans to New Yorkers.
“Our administration is continuing to aggressively combat online payday lending — and today we are urging the private sector to join us in protecting New Yorkers from this illegal activity. I applaud Bank of America for stepping up as an industry leader in this area and doing the right thing to help safeguard New York’s consumers,” says Governor Cuomo in a statement.
Bank of America says it plans to use the database to help put an end to illegal lending in New York. The database will be an enhancement to Bank of America’s “know your customer” procedures by shining a light on companies that may be involved in illegal lending.
The bank also plans to use this tool to help confirm that its merchant customers are not using their accounts to participate in illegal payday loan transactions with New York consumers. Bank of America will provide the Department of Financial Services with information about payday lending by lenders listed in the database.
Says the office of Governor Cuomo in a statement, “Last August, DFS sent cease-and-desist letters to 35 online lenders making usurious loans to New Yorkers, with annual interest rates as high as 1,095 percent. DFS also urged banks and NACHA, which is dedicated to the protection of the electronic payments system, to work with DFS to stop payday lenders from illegally accessing New York customer accounts.”