Payday lending is against the law in New York State and now Bank of America Corp will be the first big bank to use the NY regulator’s database to ensure it is not happening on the sly. The database will allow Bank of America to avoid processing illegal payments from payday lenders to state residents, Governor Andrew Cuomo said on Monday, reports Reuters.
Payday lending has been formally illegal in New York since 2013, but some lenders have maneuvered around state laws by offering the loans over the Internet and using electronic networks to move around the actual payments.
Not amused by payday lender’s creativity, the NY Department of Financial Services developed a database that identifies companies that are likely payday lenders trying to sidestep a state law.
Bank of America says they will use the database to determine whether merchant customers are using their bank accounts to either collect on payday loans or issue them to consumers.
While Bank of American will be the first, they will likely not be the last, Benjamin Lawsky, New York’s Superintendent of Financial Services noted in a released statement. He said that the state is actively seeking to create similar agreements with other large banking institutions.
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