The Obama administration is using aggressive new tactics to go after payday lenders in an effort to shut down part of an industry it targeted previously in Operation Choke Point.
The Department of Justice has used the mob-inspired Racketeer Influenced Corrupt Organization Act, known as RICO, to go after payday lenders in at least three different cases. Those cases involved Native American tribes providing online loans to people in a number of states at rates that exceed limits imposed by those states. Since the tribes enjoy immunity from federal prosecution for violating the interest rate limits imposed by states, the agency went after their partners and lawyers for conspiring with the tribes to break the limits.
“The government’s decision to extend RICO’s ‘collection of an unlawful debt’ language to online payday lenders is a significant moment in federal law enforcement,” American Banker said of the move. “If this new theory of law enforcement survives legal challenges, look for the government to continue using it in the online payday lending industry and potentially beyond.”