U.S. banks are cutting off payday lenders' access to a database of account information used to evaluate potential borrowers as regulators seek to rein in abusive practices.

About half the people with bank accounts in the U.S. are tracked by Early Warning Services LLC, owned by five of the nation's biggest banks. Some payday lenders use Early Warning data rather than credit reports to select borrowers, according to four people with direct knowledge of the practice who asked not to be named because the arrangements are private.

"We've been discontinuing service one by one," Kyle Thomas, chief of marketing and sales at Scottsdale, Arizona- based Early Warning, said in a telephone interview. "The way we're going through it reflects both the wishes of our data contributors as well as various regulators."

Hundreds of banks use Early Warning to prevent fraud by sharing their customer data, Thomas said. The company is owned by Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., BB&T Corp. and Capital One Financial Corp.

Payday loans, intended to be repaid with a borrower's next paycheck, can ensnare people in a cycle of debt as they struggle to cover charges. Like other firms, payday lenders use an applicant's bank-account number to access data including a score that reflects how the account is used.

The payday lenders don't buy Early Warning's data directly, the people said. They access it through alternative credit bureaus such as Clarity Services Inc. and FactorTrust Inc., which compile data on borrowers who use short-term loans. The data is more useful than credit reports because most short-term borrowers have low scores anyway, the people said.

Early Warning has been telling the middlemen that it wants to stop dealing with lenders that charge high interest rates to make sure it doesn't unintentionally facilitate fraud or other illegal activity, according to a letter dated last year and obtained by Bloomberg News. The company said in the letter that regulations are too complex, and it's difficult to tell if short-term lenders are following the law.

"The use of their data is very strictly limited," said Julie Conroy, a former Early Warning employee who's now research director at Aite Group LLC. "If there is a perception that there is reputational risk or potential harm to consumers that could come from the use of that data, the banks tend to be very sensitive about that."

Susana Walls, Clarity's head of marketing, said in a telephone interview that no one was available to comment. Carrie Crabill, a spokeswoman for FactorTrust, said the company wouldn't be affected by Early Warning's decision because it has many customers outside the payday industry.

The move by Early Warning will hurt payday lenders that already face mounting regulatory scrutiny. That's prompted some firms to move offshore or to make deals with American Indian tribes which can claim sovereign immunity protects them from state interest-rate caps.

Mark Curry's MacFarlane Group Inc. was among firms that used Early Warning data, two of the people said. That company struck a deal with a tribe in Oklahoma to set up websites that charge more than 700 percent interest a year, Bloomberg News reported in November. Curry said at the time that he and his firm are consultants, not payday lenders, and that any deals he has with American Indians are legal.

"This decision does not impact MacFarlane Group as we are not a lender," Joseph Lilly, a company spokesman, said in an email.

"We are disappointed that the banks who offer Early Warning Services have chosen to end it for some types of online lenders," said Lisa McGreevy, president of the Online Lenders Alliance, a lobbying group that Curry helped found. "The service is used to ensure that customer accounts are genuine and have adequate funds to pay."

The Federal Deposit Insurance Corp. and other regulators have pressured banks to stop dealing with payday lenders in a drive called "Operation Choke Point."

While regulators said they were concerned about fraud, Republicans in Congress said in a report last year that the campaign was an attempt to shut down legal businesses.

The main payday-lending trade group sued U.S. banking regulators last year, accusing them of applying back-room pressure to drive lenders out of business. The case is pending in federal court in Washington, D.C.

One of the users of Early Warning data was payday lender Carey Vaughn Brown, according to a former Clarity employee. Brown was indicted last year in New York for allegedly conspiring to make illegal loans through offshore companies.

Think Finance Inc. also used the data, the person said. It was sued last year by Pennsylvania's attorney general for allegedly using tribes as cover for an "illegal payday-loan scheme."

Paul Shechtman, Brown's lawyer, didn't respond to requests for comment. He told the New York Times last year that Brown acted in good faith and would show his innocence. Jennifer Burner, a spokeswoman for Think Finance, declined to comment.

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