Beginning in October of 2004 check cashiers, payday operators and title loan operators in several southeastern states began receiving notices that their local bank would no longer provide them bank services. Although this was on the radar screen of trade associations at a national level, it was not a particularly pressing problem for operators in the southeast. The primary "instigator" in this incident was AmSouth Bank headquartered in Birmingham, Alabama. AmSouth has offices throughout the southeast with a particularly heavy presence in Alabama, Florida, Mississippi and Tennessee. There have been similar moves by other banks in the region. The banks are absolutely paranoid about this. And, rightfully so. To date violations for non-compliance with federal laws have cost AmSouth $50 million in fines. That's $50 with six zeros!
The federal regulators are coming down hard on the banks. Go here for a thorough explanation of the issue from the bank's perspective and more details on the AmSouth debacle. This issue is getting the attention of top management in the banks, including the bank's board of directors. You can be sure ALL BANKS are looking at this closely and will most likely focus more attention on it in the future The feds are not letting up and the banks have high compliance standards to meet. The problem will not go away and all this translates into more attention on us -- not less.
Another big part of the problem seems to exist because banks incorrectly classify our businesses as a Money Service Business (MSB). This classification subjects operators to a whole host of new federal laws enacted in connection with the Bank Secrecy Act, Patriot Act and other federal statutes.
There are many negative issues relating to this classification for payday and title lenders, but the most immediate may be the inability to secure banking services. Obviously, without banking services the ability of our businesses to operate is greatly affected.
It is highly recommended that you become familiar with this problem. The problem is like lightning -- you don't know when or if it will strike you. BUT, if it does it will make for a very bad day! If you see storms and hear loud noises, you should get the message. We are hearing messages from members almost every day! To be on the safe side read the news here and see what precautions you might take. This is from those who have had their accounts closed.
If you have comments or questions, click here and drop us an e-mail or contact your state association. Also, check here often. We will update this site frequently as long as the we continue to hear about problems from our members.