June 6 A group of payday lenders filed a lawsuit
against three U.S. banking regulators on Thursday, saying a
federal anti-fraud initiative unfairly targets them by claiming
the lenders are "reputationally risky" to the banks serving
The lawsuit, filed against the Federal Reserve, the Federal
Deposit Insurance Corp and the Office of the Comptroller of the
Currency, comes days after U.S. prosecutors opened criminal and
civil probes into at least 15 banks and payment processors as
part of a wide-ranging consumer fraud investigation.
The DoJ's investigation, known as "Operation Choke Point,"
is more than a year old and aims to crack down on fraud by going
after firms that handle and move money for various suspect
The lenders allege that the regulators, with active support
from the Department of Justice (DoJ), are engaged in a
"concerted campaign" to drive payday lenders out of business "by
exerting back-room pressure on banks and other regulated
financial institutions to terminate their relationships with the
The regulators were not immediately available for comment
outside regular business hours.
More than 80 banks, including Bank of America,
Capital One Financial Corp, JP Morgan Chase & Co
, and Fifth Third Bancorp have terminated
business relationships with payday lenders as a result of the
regulatory crackdown, according to the lawsuit.
Representatives from Bank of America, JP Morgan and Capital
One did not immediately respond to emails seeking comment.
Regulators have been keeping a close eye on the payday loan
industry, in which borrowers take out small loans that usually
must be paid back when they receive their next paycheck.
The case is Community Financial Services Association v.
FDIC, 14-cv-00953, U.S. District Court, District of Columbia.
(Reporting by Supriya Kurane in Bangalore; Editing by Gopakumar