Banks can do business with Internet-based lenders that dont violate the law, the nations primary payment system said in a letter that followed warnings from regulators about the online firms practices.
Nacha, the group that oversees the automated clearing house network, told the Online Lenders Alliance, an industry association, that banks have to examine the circumstances of lenders work and take action where appropriate.
Banks need not stop processing payments for online lenders engaged in legal lending activity, Jane Larimer, the executive vice president and general counsel of Nacha said in an Aug. 26 letter.
Nachas members include Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., PNC Financial Services Group and U.S. Bancorp.
Benjamin Lawsky, New Yorks state superintendent of financial services, on Aug. 6 ordered a group of 35 online lenders, including at least four owned by Native American tribes, to cease offering loans in New York. He charged the loans violated New Yorks interest rate caps.
Lawsky also sent a letter to 117 banks and Nacha itself requesting their assistance to choke off the lenders from the Automated Clearing House system, the bank-supported network that handles electronic bank account debits. Nacha responded on Aug. 8 by asking banks to advise the payment network whether they are still doing business with the online lenders named by Lawsky.
The online lending group has argued, on various grounds, that its members do not violate the law.
The Department of Justice and the Federal Deposit Insurance Corp. have also been pressuring banks to reconsider their relationships with online lenders.