NEWS RELEASE from Delaware Community Reinvestment Action Council (DCRAC)

and Community Reinvestment Association of North Carolina (CRA-NC)

For Immediate Release

May 3, 2005

Contact: Rashmi Rangan (DCRAC) at (302) 654-5024 or rashmi@dcrac.org

or Peter Skillern (CRA-NC) at 919-667-1557 x22 or peter@cra-nc.org 

Delaware Bank Cited By FDIC 

County Bank Issued Cease and Desist Order On Payday Lending 

WILMINGTON, DE - County Bank of Delaware, which partners with more than 20 payday lenders nationwide, has been issued a cease and desist order by the Federal Deposit Insurance Corporation (FDIC) concerning its payday loans.  The FDIC charged the Rehoboth Beach-based bank with multiple violations of safe and sound banking practices, including failure to provide effective oversight and control over the payday lending chains they partner with.  They were also cited for allowing individuals other than borrowers to execute loan documents, and allowing their payday loan partners to circumvent cooling off periods for borrowers. 

Among the County Bank partners affected by this ruling are Dollar Financial Group d/b/a Money Mart, CNG Financial d/b/a Check n Go, and Q&C Holdings d/b/a Nationwide Budget Finance.  The FDIC has given County Bank until June 11 to meet a series of stringent standards or end their payday lending operations. 

For the past two years, the Delaware Community Reinvestment Action Council (DCRAC) and the Community Reinvestment Association of North Carolina (CRA-NC) have led a series of protests against County Bank and the FDIC's oversight of this bank.  These protests have highlighted County Bank's extensive operations in partnership with payday lenders.  The three payday lenders County partners with in North Carolina operate 171 payday lending outlets, or an estimated 42% of all payday lending outlets in North Carolina. 

"We applaud the FDIC for finally taking action against County Bank and its payday loan partnerships," said Rashmi Rangan, Executive Director of DCRAC.  "This is not the end of bank/payday loan partnerships in North Carolina, but it may have a domino effect," said Peter Skillern, Executive Director of CRA-NC. 

Payday loans are short-term loans that borrowers take out against their next paychecks.  They have been widely condemned for their sky-high interest rates, which can range from 400 to upwards of 1,000 percent.  Studies have documented payday lending's addictive nature and destructive effects on individuals and communities. 

The number of check cashers and payday lenders increased nationally from 2,000 in 1996 to 22,000 in 2003, yet the number of banks willing to fund payday loans has plummeted.  County Bank is one of only twelve banks in the country still partnering with payday lenders.  Payday lenders have entered into such partnerships to continue operating in states like North Carolina which have not authorized payday loans. 

In early March, the FDIC responded to years of consumer advocates' complaints against the "Dirty Dozen" banks under its jurisdiction still partnering with payday lenders by issuing new payday lending guidelines.  All twelve banks were ordered to devise internal controls to follow the new guidelines. 

The other Delaware-based member of this "Dirty Dozen" is First Bank of Delaware, headquartered in Wilmington.  During March, 2005, DCRAC and CRA-NC led a letter-writing campaign against the bank's payday lending that resulted in more than 250 letters signed by community members in Newcastle County.  The letters called on the FDIC to fail the bank on its current Community Reinvestment Act (CRA) exam. 

In response to the FDIC's new guidelines, First Bank of Delaware issued a statement on March 8 that noted, "We offer such payday loans and will be affected by the revised guidelines.  (They) may have a material adverse effect on our business." 

"As some of these twelve banks exit the payday lending business, the remaining banks may take up the slack by partnering with more payday lenders," said Rangan.  "This will further reduce their ability to monitor the operations of their payday lending partners and comply with the FDIC's new guidelines," said Skillern.  "There will likely be more cease and desist orders to come." 

More information about DCRAC and CRA-NC's history of advocacy against County Bank's payday lending activities is available from CRA-NC at http://www.cra-nc.org/campaigns.htm 

The FDIC's Cease and Desist Order against County Bank is available from the FDIC at

http://www.fdic.gov/bank/individual/enforcement/NewOrders/04-274b.html 

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About the Delaware Community Reinvestment Action Council (DCRAC) 

The Delaware Community Reinvestment Action Council (DCRAC)'s mission is to ensure equal access to credit and capital for the underserved populations and communities throughout Delaware through Education, Outreach, Advocacy, and Legislation.  Through Education and Outreach we develop consumers of financial services who can bank with and borrow from the main stream financial service providers.  Through Advocacy and Legislation, we strive to deepen the commitment to equal access to credit and asset building opportunities for all Delawareans among our financial systems, their regulators, our legislators, and the larger Delaware community. 

DCRAC   www.dcrac.org   (302) 654-5024   601 N. Church St, Wilmington DE 19801 

About the Community Reinvestment Association of North Carolina (CRA-NC) 

The Community Reinvestment Association of North Carolina is a nonprofit, nonpartisan research and advocacy organization whose mission is to promote and protect community wealth.  We advocate for change in the lending practices of financial institutions to promote wealth building for underserved communities and to end predatory lending practices that strip wealth.  Committed to creative advocacy, CRA-NC uses research, education, mobilization, media, litigation, regulatory challenges, legislative advocacy and stockholder actions to initiate change. 

CRA-NC   www.cra-nc.org   (919) 667-1557   114 W. Parrish St, Durham NC 27702