Operation Choke Point

Operation Choke Point is an ongoing initiative of the United States Department of Justice that was announced in 2013 [1], which is investigating banks in the United States and the business they do with payment processors, payday lenders, and other companies believed to be at higher risk for fraud. This operation is controversial for the potential threat to due process; the government is pressuring the financial industry to cut off the companies' access to banking services, without first having shown that the targeted companies are violating the law.

Some merchant categories that the FDIC has listed as being associated with high-risk activity include, but are not limited to:

• Ammunition Sales
• Cable Box De-scramblers
• Coin Dealers
• Credit Card Schemes
• Credit Repair Services
• Dating Services
• Debt Consolidation Scams
• Drug Paraphernalia
• Escort Services
• Firearms Sales
• Fireworks Sales
• Get Rich Products
• Government Grants
• Home-Based Charities
• Life-Time Guarantees
• Life-Time Memberships
• Lottery Sales
• Mailing Lists/Personal Info
• Money Transfer Networks
• On-line Gambling
• Payday Loans
• Pharmaceutical Sales
• Ponzi Schemes
• Pornography
• Pyramid-Type Sales
• Racist Materials
• Surveillance Equipment
• Telemarketing
• Tobacco Sales
• Travel Clubs

==Banks Terminating Relationships with Lenders== "...various other federal agencies..." also comply with this communist ideology. Frank Keating of the American Banking Association complained that Choke Point "is asking banks to identify customers" who are "simply doing something government officials don't like. Banks then 'choke off' those customers' access to financial services, shutting down their accounts." WSJ 4-24-14.

On April 17, Kevin Wack of the American Banker reported that Fifth Third Bank and Capital One had terminated their accounts with payday lenders in amid alleged increased scrutiny by federal regulators. Wack notes that "in a recent submission to a congressional committee, the Financial Service Centers of America, a trade group that represents check cashers and payday lenders, listed several banks that it says have terminated their relationships with at least one of its member companies in recent months. Besides Capital One and Fifth Third, banks on the list include Bank of America, PNC Financial Services Group, Wells Fargo and U.S. Bancorp."

The Financial Service Centers of America recently commissioned a survey of its members about bank discontinuance. The survey, conducted by Deloitte Financial Advisory Services, found that "14 of the 61 banking relationships reported by survey participants have been terminated since November 2013."

Opposition

A payday lenders' association filed a lawsuit[2] against federal financial regulators on June 5, 2014, claiming[3] that through Operation Choke Point, the FDIC, the Federal Reserve Board, and the Office of the Comptroller of the Currency have issued informal guidance to banks that exceeds "the agencies’ statutory authority, are arbitrary and capricious, were promulgated without observance of the procedures required by law, and deprive Plaintiffs of liberty interests without due process of law. Plaintiffs also seek declaratory and injunctive relief to prevent the Defendant agencies from abusing their regulatory authority over financial institutions to enforce a de facto boycott by financial institutions of CFSA’s member businesses."

The United States House Committee on Oversight and Government Reform issued a brief staff report on May 29, 2014 that stated [4], saying "The Department [of Justice] lacks adequate legal authority for the initiative" and "Contrary to the Department’s public statements, Operation Choke Point was primarily focused on the payday lending industry."

Despite this finding that Operation Choke Point is primarily focused on the payday lending industry, many media reports have focused instead on claims by sex workers that their bank accounts have been shut down. [5][6][7][8][9]. An anonymous source at one bank has denied that this was the reason for a pornography actress's account closure.[10]

On April 8, 2014, the House Financial Services Committee held a hearing with the general counsels of the federal banking agencies regarding, among other things, Operation Choke Point. Committee members from both parties argued that Operation Choke Point is hurting lawful non-bank financial service providers by pressuring to eliminate access to the banking system and, in turn, the businesses unable to offer services to constituents. The FDIC’s Richard Osterman repeatedly asserted that Operation Choke Point is a Justice Department operation and the FDIC’s participation is limited to providing information and guidance upon request. Mr. Osterman also asserted that the FDIC is not attempting to prohibit banks from offering products or services to non-bank financial service providers operating within the law. Similarly, Amy Friend, of the Office of the Comptroller of the Currency (OCC), stated that the OCC wants to ensure that banks conduct "due diligence and implement appropriate controls," but that the OCC is not prohibiting banks from offering services to lawful businesses.

On June 13, 2014, the Washington Business Journal reported on a multi-million dollar grassroots campaign spearheaded by an outside group called the US Consumer Coalition. The group pledges to spend $5 million against the Justice Department program and calls for a united coalition of consumers and businesses affected by the program.

See also

• Money laundering
• Terrorist financing