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Congressional Report Exposes "Operation Choke Point"

Brandon Arnold
June 5, 2014

Last week, the House Oversight and Government Reform Committee released a scathing report that blew the lid off a little-known initiative of the U.S. Department of Justice (DOJ) informally known as “Operation Choke Point.” In theory, the initiative purports to protect consumers from unscrupulous financial institutions. In practice, it inappropriately – and perhaps illegally – targets legal businesses that are viewed unfavorably by the Obama Administration. It has focused particular attention on the so-called payday lending industry, which it broadly labels as “a fraudulent ‘scam.’”

While short-term lending receives the harshest treatment from Operation Choke Point, it is far from the only type of business affected.  In order to hamstring payday lenders, the DOJ has pressured banks and other financial institutions to avoid interacting with these legal and legitimate establishments.

From the Committee’s report:

In a statement to the House Committee on Financial Services, a trade group of licensed money service businesses and lenders submitted recent account termination letters in which the bank explicitly attributed the termination to Operation Choke Point.

Even worse, it appears that DOJ has dubious legal authority to implement the initiative. The Department states that the statutory justification for Operation Choke Point is established by Section 951 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. However, the Committee report notes that:

The intent of Section 951 was to give the Department the tools to pursue civil penalties against entities that commit fraud against banks, not private companies doing legal business. Documents produced to the Committee demonstrate the Department has radically and unjustifiably expanded its Section 951 authority.

In light of DOJ’s aggressive and possibly illegal actions against legal businesses, the Committee is unequivocal in its rebuke of the initiative; concluding that “it is necessary to disavow and dismantle Operation Choke Point.”

Needless to say, taxpayers should be very concerned about the use of public funds for this initiative.


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