| The U.S. Justice Department has said it will end an initiative created by the Obama administration that discouraged banks from doing business with certain industries such as short-term lenders and firearm dealers.
Bank regulators and the Justice Department used “Operation Choke Point” to encourage banks and third-party payment processors to refuse banking industries that posed a reputational risk to the bank.
The controversial program involved regulators sending subpoenas to banks for all financial information on the bank’s clients that could potentially be of “elevated risk.” If the government found something suspicious, it would investigate further.
In a letter to House Judiciary Chairman Bob Goodlatte, Assistant U.S. Attorney General Stephen Boyd said “all of the department’s bank investigations conducted as part of Operation Choke Point are now over, the initiative is no longer in effect, and it will not be undertaken again.”
“We share your view that law abiding businesses should not be targeted simply for operating in an industry that a particular industry may disfavor,” Boyd also wrote in the letter.
Many groups such as the National Association of Federal Credit Unions cheered the decision, saying they had thought the initiative could deter the development of e-commerce and hinder economic growth.
But the consumer watchdog organization Allied Progress slammed the decision to dismantle the program, saying it would make life easier for financial predators and scammers.
“This is a massive giveaway to predatory payday lenders and other shady financial scam-artists. Operation Choke Point has been incredibly effective at cracking down on the flow of money to fraudulent merchants that violate the law and target vulnerable consumers,” Karl Frisch, executive director of Allied Progress, said in a statement. “Ending this program will make it easier for financial predators and other unscrupulous industries to get the resources they need to carry out their deceptive and frequently unlawful business practices.”
Indeed, Boyd in the letter acknowledged that some of the subpoenas led to the discovery of criminal activity involving certain individuals and non-bank entities, and did not rule out pursuing these investigations.
Boyd, however, continued to emphasize that the department is focused on bringing enforcement actions “without regard to political references,” and only when “warranted by the facts and the applicable law.”
