U.S. banking regulators must defend a lawsuit brought by the Community Financial Services Association of America Ltd., the main payday-lending trade group, accusing them of applying “back-room pressure” on banks to stop serving its members, Bloomberg News reported yesterday. A federal judge on Friday refused to dismiss the suit against the Federal Deposit Insurance Corp., the Federal Reserve and the Office of the Comptroller of Currency. U.S. District Judge Gladys Kessler in Washington, D.C. threw out some claims while allowing others to go forward. The lenders group, in a complaint filed last year, said its members had been unfairly targeted in the government’s anti-fraud “Operation Choke Point” initiative. The association claims that the probe — also linked to FDIC concerns over banks lending to high-risk businesses, including ammunition dealers, online gambling and pornography merchants — led regulators to deny payday lenders their constitutional rights to hold bank accounts and pursue their chosen line of business. The judge said in her decision that it was clear payday lenders had suffered harm to their businesses.
