The California Department of Business Oversight has alerted financial institutions to monitor and report illegal transactions of unlicensed payday lending activity, the state regulator said.
What’s more, the CDBO said it will be examining banks and credit unions to make sure they are taking measures to prevent unlicensed payday transactions.
“Department examinations will review for compliance to ensure safeguards are in place to prevent unlicensed payday lenders from gaining access to the ACH network and victimizing Californians,” CDBO Commissioner Jan Lynn Owen wrote in an Oct. 7 letter to financial institutions.
The commissioner also warned in her letter that to the “extent a bank or credit union conducts any business with unlicensed payday lenders, such activity could implicate safety and soundness concerns.”
For example, a bank or credit union may violate Bank Secrecy Act/Anti-Money Laundering requirements if its customer due diligence procedures do not confirm a customer’s compliance with state licensing requirements, according to the commission.
Since January, the CDBO said it has taken numerous enforcement actions, including issuing Internet alerts, desist and refrain orders, voiding transaction orders and citations against unlicensed online payday lenders.
The names of unlicensed lenders that have received multiple consumer complaints are listed on the commission’s website.