Over the last four weeks, U.S. Bancorp has severed its relationship with one of the country's biggest payday lenders, plus at least two other firms that are in the same business, according to recently filed court documents.
The question is why.
U.S. Bank did not respond to a request for comment. But at least one of the firms affected believes that the Minneapolis-based bank succumbed to pressure from banking regulators who are hostile to the payday loan industry.
"In my experience, the only logical reason a bank would terminate a longstanding, mutually beneficial relationship without warning or explanation is regulatory pressure," J. Christian Rudolph, chief financial officer of the payday loan chain Advance America, said last week in a court declaration.
Several other banks have also cut their ties to payday lenders in recent weeks, according to court documents filed by a trade group that represents short-term consumer lenders.
The recent terminations have reignited a long-running dispute between the payday lenders, which are often accused of preying on vulnerable consumers, and federal banking regulators. They have also prompted speculation that federal regulators may be trying to enact as much of their agenda as possible before Donald Trump is sworn in as president.
Throughout much of the Obama administration, payday lenders accused the banking agencies of running a veiled campaign, known as Operation Choke Point, against high-cost lenders. The industry's complaints never abated entirely, but they did become less frequent and less urgent over the last year or so.
Then on Wednesday, Advance America, which operates more than 2,100 stores nationwide, stated in court papers that over the last five weeks, five of its banking relationships have been terminated.
For the Spartanburg, S.C.-based payday lender, the loss of the U.S. Bank relationship is particularly problematic.
The two firms had been doing business together for 14 years, an Advance America executive wrote in a court filing. U.S. Bank has been the firm's primary provider of banking services, serving more than 1,200 stores while also providing payroll, payment processing and corporate banking services, the company noted.
"This is a very severe situation," Jamie Fulmer, Advance America's senior vice president of public affairs, said Monday. "Losing those relationships significantly drives up the costs for our business."
In court documents filed Wednesday, Advance America asked a federal judge to enjoin the federal banking agencies from informally pressuring banks to end their business relationships with payday lenders.
The Office of the Comptroller, which is U.S. Bank's primary federal regulator, said that the agency does not comment on litigation.
In the past, the OCC and other federal banking agencies have said that banks are free to make their own decisions about customer relationships, and that the guidance the agencies provide to banks is not binding.
U.S. Bank's recent actions included ending its relationship with NCP Finance Ohio LLP, a firm that provides funding to short-term lenders, according to court documents filed by payday lenders. U.S. Bank was also said to have cut ties earlier this month with another, unnamed payday lender.
The court papers include a statement from Ed Lette, the chief executive of Business Bank of Texas in Austin, who said that an assistant deputy comptroller in the OCC's San Antonio office recently pressured his $110 million-asset bank to end its relationship with a particular payday lender.
"The pressure that was brought to bear on our bank by our regulator left us with no choice but to drop Power Finance Texas a customer and close its accounts," Lette wrote.
The recent spate of account terminations led one payday industry lawyer to speculate Monday that the banking agencies are acting with renewed urgency prior to the change in administrations. Payday industry officials are hopeful that Trump administration officials will take a less confrontational stance than their predecessors did.
