Feds pressuring banks to walk away from online lenders
Friday, August 09, 2013 10:54 AM
The Department of Justice and the FDIC are pressuring banks to cut ties to online lenders that regulators suspect of shady business practices as part of a broad crackdown on frauds in the payment system, according to five people briefed on their work, Bloomberg reported. Examiners from the FDIC have audited banks to determine whether they work with some online lenders, including those operated by Native American tribes, according to sources who spoke with Bloomberg on condition of anonymity because the communications with regulators are confidential. The Justice Department has issued subpoenas to banks and payment processors, leading them to stop doing business with some lenders, sources said. Many companies in this growing market have evaded state and federal consumer protection measures by operating from Indian reservations. Tribal sovereignty puts them beyond the reach of U.S. regulators, they argue, the Center for Public Integrity reported.