FDIC Settles Payday Lending Lawsuit and Issues Summarizing Policy Statement
On May 22, the Federal Deposit Insurance Corporation (“FDIC”) announced that it had resolved the litigation of Advance America et al. v. FDIC et al. in the U.S. District Court for the District of Columbia. In that case, the plaintiffs alleged that the FDIC and the Office of the Comptroller of the Currency overstepped their regulatory authority in connection with a 2013 initiative by the U.S. Department of Justice known as “Operation Choke Point.” Under Operation Choke Point, federal regulators investigated banks servicing targeted business sectors, including payday lending. Advance America Cash Advance and its co-plaintiffs asserted that FDIC officials acted to cut off payday lending businesses’ access to U.S. banks and financial services.
In connection with the settlement, the FDIC issued a statement summarizing the FDIC’s “longstanding policies and guidance” regarding the circumstances in which the FDIC would typically recommend that a financial institution terminate a customer’s deposit account, among other policies. Also included in the statement is a letter issued by FDIC Deputy General Counsel Floyd Robinson, which acknowledges that “certain employees acted in a manner inconsistent with FDIC policies” in connection with the “Operation Choke Point” initiative.
Inclusive Prosperity Act of 2019 Introduced in U.S. Senate and House of Representatives
On May 22, 2019, Senator Bernie Sanders (I-VT) and Representative Barbara Lee (D-CA) introduced the Inclusive Prosperity Act of 2019 (the “IPA”), which has been co-sponsored by Senator Kirsten Gillibrand (D-NY) and more than a dozen House democrats. If adopted, the IPA would impose a transaction tax of 0.5%, 0.1%, and 0.005% on stocks, bonds, and derivatives trading, respectively. According to Sanders, this “speculation fee” would generate an estimated $2.4 trillion in public revenue over its first 10 years of enactment and up to $220 billion within the first year of enactment. Sanders calls for the revenue from the fees to be allocated to programs for universal health insurance coverage, tuition for public colleges and universities, and student debt recovery programs. Sponsors of the bill also claim that the IPA would deter high-frequency trading, which they argue has a destabilizing effect on the domestic and global financial systems, does not provide economic value, and does not benefit the U.S. economy.