U.S. Regulators Squeeze Banks to Cut Ties to Some Online Lenders

The Department of Justice and the Federal Deposit Insurance Corp. are pressuring banks to cut ties to online lenders whom regulators suspect of shady business practices, as part of a broad crackdown on frauds in the payment system, according to five people briefed on their work.

Examiners from the FDIC have audited banks to determine whether they work with some online lenders, including those operated by Native American tribes, according to the people, who spoke on condition of anonymity because the communications with regulators are confidential. The Justice Department has issued subpoenas to banks and payment processors, leading them to stop doing business with some lenders, the people said.