Report: US banks' payday loan practices under investigation

25 February 2013

Several major US banks are under investigation due to suspicions they are breaching rules relating to payday loans.

Both the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corporation are looking into the roles of a number of financiers in the offering of these short-term lending arrangements, a number of people with knowledge of the matter have told the New York Times.

Sources indicated to the news source that with payday loans being banned in 15 states, an increasing number of American financiers are seeking to evade loan interest rate caps by establishing online operations in countries such as the West Indies, Malta and Belize.

Included in this group of banks are the likes of the Bank of America, Wells Fargo and JPMorgan Chase.

Even though these groups do not technically make the loans, they are a critical link to the contracts by allowing lenders to withdraw payments directly from individuals' accounts.

This is occurring even in states where the deals are prohibited and regulators are therefore determined to close this loophole.

By Tony Aynsley

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