April 25 A U.S. court on Friday ordered North
Carolina's Four Oaks Bank to pay a penalty of $1.2 million over
claims it failed to protect consumers' bank accounts in a win
for federal prosecutors investigating banks doing business with
The civil penalty was the result of a complaint filed in
January in U.S. District Court in eastern North Carolina that
said the bank had been "deliberately ignorant" when dealing with
merchants who were defrauding customers.
A settlement, including the payment, was proposed when the
complaint was filed. The bank said in a statement in January
that as part of the deal it did not admit to the allegations or
to any liability.
In their complaint, U.S. prosecutors alleged Four Oaks Bank
allowed a privately owned third-party payment processor in Texas
to illegally process around $2.4 billion in return for more than
$850,000 in fees.
Almost all of the Texas processor's business was with
Internet payday lenders, the complaint said. The payday lenders
offer fast cash on the web - usually a few hundred dollars - at
often exorbitant interest rates that can range from 400 percent
to 1,800 percent or more, it said.
The case was part of a justice department push, known as
"Operation Choke Point," to investigate whether banks enabled
payday lenders to illegally siphon billions of dollars from U.S.
checking accounts, according to a report in the New York Times.
"The Department of Justice is committed to holding
accountable financial institutions that know they are
facilitating fraud that harms consumers, or are deliberately
ignorant to that fact," said U.S. assistant attorney general
Stuart Delery in a statement.
Some congressional lawmakers have criticized the effort,
accusing the Department of Justice of trying to covertly quash
the payday lending industry.
The case is United States of America v. Four Oaks Fincorp,
Inc. et al, U.S. District Court in the Eastern District of North
Carolina, No. 5:14-cv-00014
(Reporting by Mica Rosenberg in New York; Editing by Bernard