Banks Processing Internet Payday Payments through Bank Accounts that Customers Asked be Closed

Banks and payday lenders have be close pals for a while now. First, we learned that banks were funding payday loans by lending to the lenders, then we learned that banks were doing their own payday loans or “Direct Deposit Advances” as some prefer to call them, and now, thanks to NYT writer Jessica Silver-Greenberg , we learn that some banks are helping payday lenders in a different way, by processing internet payday advances through bank accounts, even after being asked by customers to close the accounts, and even when the only money in the accounts is child support. The story claims that these lenders allow the auto withdrawals to go through even in states where payday loans are banned by law. The banking industry says it is simply serving customers who have authorized the lenders to withdraw money from their accounts, but the FDIC and the CFPB are taking a close look, by examining banks’ roles in the online loans. No doubt these loans have caused many to overdraw their accounts, which will be the subject of my next blog on ChexSystems. Stay tuned