BMO Harris Bank Among Companies Sued Over Payday Loans
BMO Harris and other banks allow out-of-state payday lenders to access a processing system used by banks to credit and debit consumer checking accounts in states where such loans are illegal, according to the complaints filed in federal courts in Greenbelt, Maryland, and Philadelphia.
The banks “knew they were crediting and debiting consumers’ accounts for unlawful purposes,” according to the complaints filed by Patricia Booth from Garnet Valley, Pennsylvania, and Jacinta Elder of Chevy Chase, Maryland.
The Justice Department and Federal Deposit Insurance Corp. are pressuring banks to cut ties with online lenders that advertise short-term payday loans that borrowers agree to repay with their next paycheck. Online lenders typically require borrowers to authorize direct debits from bank accounts to pay back the loans. Interest rates on the loans can top 500 percent, according to the complaints.
Two American Indian tribes sued New York state’s financial regulatory agency in August over the crackdown on Internet lending businesses, some of which are tribally owned.
At least 13 states have banned the loans or imposed a cap on interest rates, according to the complaints.
“The allegations made against BMO Harris Bank by the plaintiffs have no merit, and we strongly deny the claims that are being alleged,” Paul Deegan, a spokesman for Toronto-based Bank of Montreal (BMO), said in an e-mail.
The cases are Elder v. BMO Harris Bank, 13-cv-03043, U.S. District Court, District of Maryland (Greenbelt) and Booth v. BMO Harris Bank, 13-cv-05968, U.S. District Court, Eastern District of Pennsylvania (Philadelphia)
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