Removing Barriers Blog

DOJ Responds to Congress about Operation Choke Point
Posted July 15, 2015 by CUNA Advocacy

The Department of Justice (DOJ) recently responded[LD1]  to a letter from Rep. Blaine Luetkemeyer (R-MO) and 31 other Members of Congress which requested an investigation into Operation Choke Point and the DOJ staff involved in the investigation.

In the letter to Luetkemeyer, the DOJ responded to allegations found in a House Oversight and Government Reform Committee report and other concerns about the DOJ’s actions in Operation Choke Point impacting legal businesses. The key findings of the House report argued that:

  • Operation Choke Point was created by the Justice Department to “choke out” companies the Administration considers a “high risk” or otherwise objectionable, despite the fact that they are legal businesses.  The goal of the initiative is to deny these merchants access to the banking and payments networks that every business needs to survive.
  • Operation Choke Point has forced banks to terminate relationships with a wide variety of entirely lawful and legitimate merchants.  The initiative is predicated on the claim that providing normal banking services to certain merchants creates a “reputational risk” sufficient to trigger a federal investigation.  Acting in coordination with Operation Choke Point, bank regulators labeled a wide range of lawful merchants as “high-risk” – including coin dealers, firearms and ammunition sales, and short-term lending.  Operation Choke Point effectively transformed this guidance into an implicit threat of a federal investigation.
  • The Department is aware of these impacts, and has dismissed them.  Internal memoranda on Operation Choke Point acknowledge the program’s impact on legitimate merchants.  Senior officials informed Attorney General Eric Holder that as a consequence of Operation Choke Point, banks are exiting entire lines of business deemed “high risk” by the government.
  • The Department lacks adequate legal authority for the initiative.  Operation Choke Point is being executed through subpoenas issued under Section 951 of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.  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.
  • Contrary to the Department’s public statements, Operation Choke Point was primarily focused on the payday lending industry.  Internal memoranda and communications demonstrate that Operation Choke Point was focused on short-term lending, and online lending in particular.  Senior officials expressed their belief that its elimination would be a “significant accomplishment” for consumers.

The DOJ’s response stated that its investigations did not find improper attorney misconduct surrounding Operation Choke Point. However, it did state that concerns expressed in the report that legal internet payday lending was targeted were “understandable” but that lawful internet lending businesses were not targeted. The DOJ also found that Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) subpoenas were not used to pressure banks to terminate relationships with lawful businesses. Additionally, the letter states that the DOJ concluded that the evidence did not demonstrate that Operation Choke Point compelled banks to terminate business relationships with other lawful businesses. Further, the letter states that DOJ attorneys did not mislead Congress about Operation Choke Point.

CUNA continues to monitor Congressional concerns surrounding Operation Choke Point. Credit unions support the federal government’s role in fighting fraud and ensuring the integrity of the financial markets. However, we remain concerned that Operation Chokepoint’s broad enforcement tactics impacting legal businesses could undermine effectiveness and create risks to consumers and the economy.


 [LD1]Link to letter from DOJ