THE BURNED OVER DISTRICT

As shifty payday lenders find new means and new venues to continue their fleecing of financially ignorant and desperate Americans, our favorite Congressional felon, Darrell Issa is running interference for them as the DoJ attempst to bring some regulatory sanity to the business.

In the first action under Operation Choke Point, Justice Department officials brought a lawsuit this month against Four Oaks Bank of Four Oaks, N.C., accusing the bank of being “deliberately ignorant” that it was processing payments on behalf of unscrupulous merchants — including payday lenders and a Ponzi scheme. As a result, prosecutors say, the bank enabled the companies to illegally withdraw more than $2.4 billion from the checking accounts of customers across the country.

The lawsuit, which includes reams of internal bank documents, offers the most vivid look yet at how some senior bank executives brushed off warning signs of fraud while collecting hundreds of thousands of dollars in fees. While the bank has reached a tentative $1.2 million settlement with federal prosecutors, the impact of the lawsuit extends far beyond Four Oaks, and federal prosecutors say this points to a problem rippling fast across the banking industry.

Banks are required under the Bank Secrecy Act, a federal law that requires banks to maintain internal checks against money laundering, to thwart suspicious activity by thoroughly examining both their customers and the companies their customers do business with. But until recently, they have largely escaped scrutiny for their role providing financial services to the payment processors.

The new, more rigorous oversight could have a chilling effect on Internet payday lenders, which have migrated from storefronts to websites where they offer short-term loans at interest rates that often exceed 500 percent annually. As a growing number of states enact interest rate caps that effectively ban the loans, the lenders increasingly depend on the banks for their survival. With the banks’ help, the lenders that typically work with a third-party payment processor that has an account at the banks are able, authorities say, to automatically deduct payments from customers’ checking accounts even in states where the loans are illegal.

Short-term lenders argue that the loans, when used responsibly, can provide vital credit for a whole swath of borrowers largely frozen out of the traditional banking services, while state law enforcement officials say that the lenders still have to abide by state restrictions aimed at shielding residents.

And the payday industry has its defenders. Representative Issa has begun an investigation into Operation Choke Point, according to a letter addressed to Attorney General Eric H. Holder Jr.

In the January letter — a copy of which was reviewed by The New York Times — Mr. Issa accused the Justice Department of trying to “eliminate legal financial services to which the department objects.”

So far, it is unclear whether those objections will be enough to stifle the Justice Department’s investigation. But the assistant United States attorney who led the investigation is scheduled to leave the investigations in February, according to several people with direct knowledge of the matter, and the Justice Department is not extending his detail. Other lawyers within the agency are working on separate investigations related to Choke Point. The Justice Department declined to comment on the investigation, but people with knowledge of the matter say that the agency is fully committed to the project.

Darrell probably doesn't give a damn about payday lenders, but the banks which can collect lots of nice fat fees will keep him interested in this.