Payday Lender Group Sues Over 'Operation Choke Point'

Friday, 06 Jun 2014 12:54 PM

By Melissa Clyne

  Comment  |
   Contact  |
  Print  
|  A   A  
  Copy Shortlink
A secretive 2013 Obama administration initiative known as Operation Choke Point, which aims to pressure banks to stop doing business with payday lenders and other businesses it deems to be at high risk of fraud, is the impetus for a lawsuit filed by a leading payday lending trade group, Bloomberg News reports.

The complaint, filed by The Community Financial Services Association of America, accuses federal regulators of "a concerted campaign" to put payday lenders out of business by pressuring banks, via threat of investigation, to cease doing business with them.

Already more than 80 banks have terminated business relationships with payday lenders, according to the suit, after federal regulators informed them that continuing their relationships with payday lenders "will result in harsh and prolonged examinations, reduced examination ratings, and/or other punitive measures."

It's not just payday lenders who are being targeted, according to The Economist, which profiled a stripper who was informed last month by Chase that the financial institution was closing her account because she was considered a "high risk" customer.

On May 29, according to The Economist, a congressional committee upset over Operation Choke Point's tactics, released a report saying ideologues are trying to "strangle legitimate businesses" — such as payday lenders, firearms, tobacco, coin and fireworks dealers, as well as dating services — by choking them out of "access to banks and payment systems, by prosecuting payment firms that abet suspect transactions."

Just the threat of an investigation is enough to scare financial institutions from keeping these customers, according to The Economist, which notes many banks have already entered into nonprosecution agreements or have been hit with steep fines, meaning "even a minor legal infraction could open up a prior settlement, with dire consequences."

The price tag of an investigation also impacts their decision to dump "risky" customers.
Payday lenders cannot afford to stay afloat without a bank's backing, according to The Washington Post, which last month published a piece looking at the ability of the government to "choke off" the money supply for industries that are legal.

"IRS officials must already be salivating about ways to apply Operation Choke Point to tea party groups," Post reporter Todd Zywicki wrote. "In principle, of course, the logic of Operation Choke Point could be extended to groups not currently targeted. Notably absent from the FDIC's hit list, for example, are abortion clinics, radical environmental groups, or, well, marijuana shops, for that matter. Something similar was done to cut off credit-card payments to support the operation of WikiLeaks."

Related Stories:

© 2014 Newsmax. All rights reserved.

  Comment  |
   Contact  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

IRS Gave White House Thousands of Taxpayer Documents

Thursday, 27 Nov 2014 18:48 PM

The IRS improperly turned over thousands of confidential tax documents to the White House for review, according to infor . . .

Hillary's Speeches Carry Hefty Price Tag, Specific Demands

Thursday, 27 Nov 2014 17:32 PM

While she doesn't come with a rock star's extensive backstage rider, new documents about requirements for hosting a Hill . . .

Russian Muslim Leader Swears Obedience Oath to ISIS

Thursday, 27 Nov 2014 17:02 PM

A Russian Muslim leader from the North Caucasus region of Dagestan swore allegiance to Islamic State, according to a You . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved