NY Governor Andrew “Yes, my brother is the guy from CNN” Cuomo announced this morning that the state’s Department of Financial Services now has a database of companies that have allegedly been tied to making illegal payday loans to people in New York.
The new DFS database will give Bank of America and the banks that eventually join the project the ability to do proper due diligence. The bank says it will use the info to screen its merchant customers to ensure they aren’t using their accounts to make or collect on illegal payday loans to New Yorkers. BofA also plans employ the database in helping to identify lenders that engage in potentially illegal payday loan transactions with BofA customers in New York.
For the last year, the state has been attempting to curb high-interest, short-term loans made by unlicensed and out-of-state lenders. NY Attorney General Eric Schneiderman’s office cited nearly three dozen such operations in 2013, including Western Sky, whose owner has tried, to no avail, to hide behind a purported tribal affiliation.
In a separate but related announcement from Schneiderman today, Capital One has agreed to change its screening process for customers wishing to open a checking or savings account. The screening system currently used by the bank was deemed to be too restrictive to lower-income consumers, who then turn to fringe financial options like check-cashing operations and payday lenders when they are denied access to a proper bank.
Under Cap One’s agreement with the state, it will still consider a customer’s past misdeeds but will not take into account a customer’s current creditworthiness in its decision making process. The bank says it will be making this change to its screening process nationwide, hopefully opening the doors to millions of unbanked and underbanked consumers.