Lenders Ask Court to Stop Illegal Operation Choke Point
November 30, 2016
Advance America recently filed an emergency injunction in the U.S. District Court for the District of Columbia seeking an immediate end to the illegal federal campaign known as Operation Choke Point.
The strong-arm program forces banks to disqualify payday lenders and other legitimate industries from critical banking services. Members of the Community Financial Services Association of America (CFSA) and Advance America - co-plaintiffs in a 2014 suit filed against the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve and the Office of the Comptroller of the Currency - have lost dozens of banking relationships in recent years, disrupting treasury services and jeopardizing their ability to pay employees.
"Operation Choke Point is a shadow campaign against law abiding businesses," said Jamie Fulmer, senior vice president of public affairs for Advance America. "Because of improper regulatory pressure, Advance America has lost five banking relationships over the past month alone. Regulators are using backdoor tactics to eliminate short-term lending. The Court can shine a light on this malfeasance, and impose transparency for the sake of public interest."
The House Oversight and Government Reform Committee exposed the intent of Operation Choke Point. According to internal FDIC memos, senior officials said that eliminating payday lending would be a "significant accomplishment." Officials also described a personal animus against lenders: "I literally can not (sic) stand pay day (sic) lending... [they] do not deserve to be in any way associated with banking."
The court papers include a statement from a banker who wrote "the pressure that was brought to bear on our bank by our regulator left us no choice" than to drop a payday lender and to "close its accounts."
Operation Choke Point has expanded, as lenders have continued to lose banking access as well as data used to evaluate borrowers' ability to repay. This latest development comes as the CFPB seeks to finalize rules that would severely restrict lending, and require lenders to more rigorously underwrite borrowers. Federal banking examiners have suggested that conducting business with short-term lenders - without differentiating between legal and illegal operations - is an inappropriate practice. Forceful prosecution of illegal lending is responsible. Unfortunately, Operation Choke Point is not that: it is a coordinated effort against all short-term lending.