A growing number of payday lenders say that they are being persecuted by banks at the behest of federal regulators, the Washington Post reported today. Already under siege by the Obama administration for flouting state laws, payday lenders now face a more subtle but potentially devastating assault from banks threatening to cut off their access to the financial system unless they stop offering the high-interest, small-dollar loans. Republicans in Congress say the administration is abusing its regulatory powers to shut down legitimate businesses. Last August, 31 GOP lawmakers accused the Department of Justice and the Federal Deposit Insurance Corp. of “intimidating” banks and payment processors to “terminate business relationships with lawful lenders.” Last month, in a hearing before a Senate Banking subcommittee on consumer protection, Sen. David Vitter (R-La.) complained that several payday lenders in his home state had been dumped by their banks in recent months.
