House Oversight Committee “Uncovers Evidence of FDIC Pressuring Banks”
In their ongoing investigation of Operation Choke Point, the House Oversight and Government Reform Committee released evidence that “federal regulators are pressuring banks to terminate relationships with legal yet disfavored industries, without regard to the legitimacy or risk profile of individual companies.”
Congressman Darrell Issa, chairman of the House Oversight and Government Reform Committee, and Congressman Jim Jordan, chairman of the Government Reform subcommittee on regulatory affairs, cite a letter from a Federal Deposit Insurance Corporation (FDIC) regional director which they argue "effectively ordered a target bank to terminate all relationships with payday lenders, contradicting previous sworn statements before Congress."
The FDIC regional directorâ€™s letter begins by explaining that the bank is being investigated because of "involvement in activities related to payday lending." The letter goes on to pressure the bank to terminate all payday lending relationships because of ideological opposition, without respect to legality:
It is our view that payday loans are costly, and offer limited utility for consumers, as compared to traditional loan products... Consequently, we have generally found that activities related to payday lending are unacceptable for an insured depository institution.
The FDIC letter confirms that federal regulators are making no distinction between fraudulent activity â€“ which regulators have claimed is the target of Operation Choke Point â€“ and relationships with regulated, licensed, legally-compliant lenders.
Forceful prosecution of illegal lending is responsible and admirable. Unfortunately, as these new details clearly show, federal regulators have far exceeded their mandate to combat consumer fraud by harming legitimate businesses and our borrowers.