Governor Cuomo Announces Citibank, JPMorgan Chase, M&T Bank and Valley National Bank to use DFS Database to Help Protect Consumers from Illegal, Online Payday Lending

Press Release

Governor Andrew M. Cuomo announced today that four additional banks have agreed to use a new database created by the State's Department of Financial Services to help identify and stop illegal, online payday lending in New York. The banks -- Citibank, JPMorgan Chase, M&T Bank and Valley National Bank -- will utilize a database containing information on companies that have been subject to actions by DFS based on evidence of illegal payday lending. This tool provides a powerful due diligence resource for financial institutions to protect consumers and help ensure that electronic payment and debit networks are not used to transmit or collect on illegal, online payday loans to New Yorkers. Earlier this year, Bank of America became the first financial institution to agree to use this DFS database.

"Our administration will not tolerate illegal payday lending in New York -- plain and simple," Governor Cuomo said. "By working together with the private sector, we are forcefully combatting illegal payday lenders and helping to stamp out illicit loans that trap New Yorkers in destructive cycles of debt. I commend these financial institutions for doing the right thing by joining us to protect consumers."

Benjamin M. Lawsky, Superintendent of Financial Services, said: "Many online payday lending companies traffic in financial misery and seek to profit by trapping consumers in crushing cycles of debt from which they cannot escape. We thank Citibank, JPMorgan Chase, M&T Bank, and Valley National Bank for partnering with DFS as industry leaders to help stop illegal, predatory lending in New York. We are continuing to reach out to other financial institutions -- asking that they work alongside us in this effort. We expect to announce additional partnerships in the weeks and months to come."

"New York State is leading the nation in holding the line against illegal, short-term payday loans, which ensnare borrowers in a dangerous cycle of recurring debt," said Chuck Bell, programs director for Consumers Union. "Consumers Union applauds Governor Andrew Cuomo and the Department of Financial Services for creating this new database to protect consumers and communities against the scourge of illegal payday loans. These loans can carry astonishingly high interest rates, as high as 500 percent or 1,000 percent APR, which flagrantly violate state law. We are also greatly encouraged that major state and national financial services companies are joining the fight to help protect New Yorkers against predatory lending."

Sarah Ludwig, co-director of New Economy Project, said: "We congratulate Superintendent Lawsky and DFS for creating such an effective, pragmatic mechanism for holding banks accountable to New Yorkers when it comes to illegal payday lending. DFS has yet again made clear that New York is a payday lending-free zone and intends to stay that way."

DFS' database includes companies that the Department has identified and taken action against through the Department's ongoing, more than year-long investigation as having made illegal payday loans over the Internet to New Yorkers. As the investigation proceeds, the database will be updated accordingly.

Payday lending is illegal in New York under both civil and criminal usury statutes. In some cases, however, lenders 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. Nonetheless, online payday lending is just as unlawful as payday lending made in person in New York.

"We are committed to protecting consumers and ensuring better safeguards are in place around the payment system," said Craig Vaream, North America head of payables and receivables at JPMorgan Chase. "This database gives us another tool in our ongoing efforts to combat illegal, online payday lending."

"Citi is deeply committed to financial inclusion and responsible finance," said Citi U.S. Retail Banking Chief Operating Officer Robert Beck. "We have long-maintained a policy not to engage in the business of payday lending -- either by offering such products or financing those that do. The DFS database will further strengthen our efforts to protect our customers and avoid servicing predatory lenders."

"Thanks to Superintendent Lawsky and the Department of Financial Services for providing this useful database, and for working collaboratively with the banking community to protect consumers and ensure the availability of fair, transparent and reliable financial services," said Richard S. Gold, Vice Chairman and Chief Risk Officer at M&T Bank.

"Valley quickly saw that the Department of Financial Services' payday lender database would be valuable information the bank could use in protecting its customers from the abusive practices of payday lenders. This database will help Valley keep track of companies that might harm our customers," said Maureen Zegler, First Senior Vice President at Valley National Bank.

The Cuomo Administration has taken a series of steps to help stop illegal online payday lending in New York. In February 2013, DFS issued a warning to debt collectors that loans with interest rates above the statutory maximums are void and unenforceable, and that collecting on such loans is therefore illegal.

In August 2013, DFS sent cease-and-desist letters to 35 online lenders making usurious loans to New Yorkers, with annual interest rates as high as 1,095 percent. DFS also urged banks and NACHA, which administers the Automated Clearing House (ACH) network, to work with DFS to stop payday lenders from illegally accessing New York customer accounts.

DFS expanded its investigation in December 2013 by issuing subpoenas to 16 online "lead generation" firms suspected of deceptive or misleading marketing of illegal, online payday loans in New York. These firms typically do not make payday loans directly, but instead set up websites that market those loans and collect sensitive personal information from consumers. Lead generators then sell this personal information to illegal online payday lenders and other companies, including scam artists. DFS received complaints against many of these firms including false and misleading advertising, harassing phone calls, solicitations for unrelated products and fraudulent charges for phony financial products.

In April 2014, MasterCard and Visa agreed with DFS to take a series of steps to help stop this illegal activity over their debit card networks. DFS also sent additional cease-and-desist letters to 20 online lenders making usurious loans to New Yorkers.

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