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Banks Stop Selling Account Data to Payday Lenders Amid Pressure
American Banker, an industry publication, reports that U.S. banks are cutting off payday lenders’ access to a database of account information used to evaluate potential borrowers because regulators are seeking to rein in abusive practices.
About half the people with bank accounts in the U.S. are tracked by a specialized consumer reporting agency known as Early Warning Services LLC, owned by five of the nation’s biggest banks. Hundreds of banks use Early Warning to prevent fraud by sharing their customer data, Thomas said. The company is owned by Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., BB&T Corp. and Capital One Financial Corp.
Early Warning has been cutting them off. The company said in a letter that regulations are too complex, and it’s difficult to tell if short-term lenders are following the law. It did not want to facilitate illegal activity.
The Federal Deposit Insurance Corp. and other regulators have pressured banks to stop dealing with payday lenders in a drive called “Operation Choke Point.”