WASHINGTON - The score so far: Regulator 2, Peoples National Bank 0.
The $103 million-asset Paris, Tex., bank failed again Wednesday in its bid to overturn the Office of the Comptroller of the Currency's unfavorable rating. The unfavorable ruling, made in the U.S. District Court for the Eastern District of Texas, was another blow to Peoples' attempt to keep its profitable payday-lending business.
On its most recent examination, the OCC gave the bank an "unsatisfactory" rating for operating what the agency calls an unsafe business. Peoples contested the rating and took the OCC to court when it would not allow the bank to appeal to the regulator's ombudsman.
On Oct. 7 Judge Leonard Davis dismissed the suit, which he said was not in his jurisdiction. The bank filed a motion for the judge to reconsider his decision, but on Wednesday he upheld it.
Peoples' fight to hang on to the payday business, which it entered in February 2001, is not over. In March the OCC sought approval for a cease-and-desist order that would force Peoples to stop payday lending. The bank is contesting that order and will make its case before an administrative law judge in Dallas on April 14.
Officials from Peoples would not discuss the ruling. The OCC said it had no comment.
The agency insists that the payday operation is unsafe, even though Peoples posted a $2.2 million profit for the first half, is well capitalized, and maintains a healthy loan-loss reserve - 1.14% of its $82.9 million-asset loan portfolio, according to the Federal Deposit Insurance Corp.
Peoples' chargeoffs have jumped dramatically since it got into payday lending, but those have been more than offset by the income the business has generated. The bank earned $29.4 million of interest income from the business in the first half, versus $6.3 million in 2000, the last full year before it entered payday lending.
In a statement posted on Peoples' Web site, Ronald E. Abbott, its chairman and chief executive officer, said that the OCC was trying to force the bank out of the business. The bank has conducted its short-term lending operation "in a safe and sound manner with a strong emphasis on consumer protections," he said.
