The U.S. Department of Justice and government banking regulators have targeted licensed and regulated business in an effort called “Operation Choke Point.”
The result of this effort has been to severely impede the operations of check cashers, bill pay centers and lenders who serve some communities.
Operation Choke Point is aimed at pressuring banks to terminate their relationships with a wide variety of licensed and regulated merchants including coin dealers, check cashers, bill pay centers and small loan lenders.
The DOJ is leading an medley federal agencies, including the FTC, FDIC, OCC, CFPB and FBI to deny these merchants access to the some banking and payment systems.
As a result, licensed and regulated merchants, such as check cashers and bill pay centers that many consumers rely on for needed financial transactions, now find themselves having to seek legal action and congressional intervention to conduct business.
Some banks have chosen not to serve low- and middle-income communities, or they have overpriced many of their vital services like checking accounts.
Check cashers, bill payment centers and even payday lenders now fill a role for consumers who have chosen not do business with banks, can’t afford to, or have chosen to severely limit the amount of business they are willing to conduct.
The end result of the government’s action, the remaining financial institutions used by underserved consumers may no longer be available.
Contrary to the DOJ’s assertion that Operation Choke Point is designed to combat consumer fraud, evidence obtained by Congress suggests that the real goal of the initiative is to target licensed and regulated industries the Administration deemed “objectionable.”
William Isaac, former chairman of the Federal Deposit Insurance Corporation, has characterized the operation as an “attack on market economy” with a frightening “Orwellian result.”
In USA Today, University of Tennessee Law Professor Glenn Harlan Reynolds warned that Operation Choke Point will lead to disastrous consequences down the road: “While abortion clinics and environmental groups are probably safe under the Obama Administration, if this sort of thing stands, they will be vulnerable to the same tactics if a different administration adopts this same thuggish approach toward the businesses that it dislikes.”
Last month, Congressman Blaine Luetkemeyer intervened with legislation to stop this widespread and unlawful practice.
His bill would ensure that existing laws are interpreted as intended, overzealous use of regulatory and enforcement tools are curbed, and financial institutions have the ability to continue offering products and services to law abiding businesses.
Recently, The Federal Deposit Insurance Corp. submitted a list of vendors it believed no longer warranted heightened scrutiny.
This is a positive development and should be followed by other federal agencies cooperating with Operation Choke Point.
Although its original intention may have been different, Operation Choke Point is hurting financial service availability for consumers underserved by banks and other providers who have chosen to leave certain communities.
This misguided policy disproportionately affects traditionally underserved, low-to-moderate income, urban communities — many with significant minority populations.
Choke Point’s targeting of regulated and licensed merchants that serve under-banked or non-bank consumers has the potential to create a virtual financial service desert.
The policy is ill-advised. The tactics are thuggish. The results are devastating. We urge the Administration to stop Choke Point’s focus on legitimate companies providing access to financial services in underserved communities.
