Gov. Andrew Cuomo announced Monday that Bank of America is the first financial institution to use a New York State Department of Financial Services database to prevent illegal payday lending.
“We are pleased that Bank of America set a strong example and partnered with us on this issue,” said Benjamin M. Lawsky, state superintendent of financial services, in a statement. “It is vital that we combat these illegal, predatory loans, which trap New Yorkers in destructive cycles of debt.”
The database will enhance Bank of America”™s due diligence and “know your customer” procedures by identifying companies that may be engaged in illegal lending, according to a state press release. Bank of America plans to use the database to help confirm that its merchant customers are not using their accounts to make or collect on illegal payday loans to New York consumers.
Bank of America also plans to use the database to identify payday lenders that engage in potentially illegal payday loan transactions with its New York consumer account holders. Bank of America also will provide the Department of Financial Services with information about payday lending activities by lenders listed in the database, the press release said, including identifying lenders that continue to engage in potentially illegal lending activities despite the department”™s previous actions.
Payday lending ”“ in which relatively small, high-cost loans are given with short repayment terms ”“ is illegal in New York under both civil and criminal usury statutes. Lenders occasionally attempt to skirt New York”™s prohibition on payday lending by offering loans over the Internet ”“ and collecting on them using electronic payment and debit networks ”“ in an effort to avoid prosecution.
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