FDIC Caution

The FDIC’s Left Hand Slaps Its Right Hand

I’m on vacation for a week, so y’all will be spared further abuse until at least the 29th. Before I bow out, however, I’d like to give a hat tip to the FDIC for its exercise of pure chutzpa and sublime soft-shoe-shuffling in attempting to dance away from a letter from one its officials that flat-out told a bank that the entire payday lending biz is problematic (paid subscription required).

The Federal Deposit Insurance Corp. told an Ohio bank early last year that doing business with payday lenders is generally unacceptable, according to a letter released Friday by House Republicans.


The newly released FDIC letter was written in February 2013, before the agency’s actions had become the focus of public controversy. It was sent to the bank’s board of directors, and signed by M. Anthony Lowe, the FDIC’s Chicago regional director. The name of the Ohio bank that received the letter is blacked out in the version that was released publicly.

“It is our view that payday loans are costly, and offer limited utility for consumers, as compared to traditional loan products,” the letter states.

The letter expresses concern about the bank’s processing of transactions on behalf of one particular payday lender – the name of that company is also blacked out. It states that the bank’s relationship with this payday lender “carries a high degree of risk to the institution, including third-party, reputational, compliance and legal risk, which may expose the bank to individual and class actions by borrowers and local regulatory authorities.”

“Consequently, we have generally found that activities related to payday lending are unacceptable for an insured depository institution,” the letter states.

Sounds like the critics of Operation Choke Point have a point, doesn’t it? Not so fast.

The FDIC responded to the release of the letter by throwing Mr. Lowe under a bus.

The February 2013 letter is not reflective of FDIC policy,” Barr said. “Because we have been asked many questions, the FDIC issued guidance in September 2013 making clear that financial institutions operating with the appropriate systems and controls are neither prohibited nor discouraged from providing services to customers complying with applicable federal and state laws.”

“We have made this policy clear to our bank supervision managers and examiners, and worked hard to make sure that the policy is being followed,” he continued. “We have asked banks to report any communications they’ve received that do not appear to be consistent with our guidance to the FDIC’s management, ombudsman or inspector general.”

Those banks who send such reports to the FDIC can expect nothing but the most lax examinations and favorable regulatory treatment on a go-forward basis. At least, they can until every member of the board and senior management is mysteriously felled by attacks by rabid Snow Monkeys imported from Sierra Leone.

So, according to the FDIC, Lowe was an outlier who didn’t understand the actual policy, which had not yet been written, although he should have known the content of the then non-existent policy because, after all…well…ummm…Shut Up! Shut Up! Shut Up!

Just another day in Wonderland.

And people actually make this a conscious career choice?

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