The move hands a big victory to Republican lawmakers who charged that the initiative was hurting legitimate businesses. | AP
The Justice Department has committed to ending a controversial Obama-era program that discourages banks from doing business with a range of companies, from payday lenders to gun retailers.
The move hands a big victory to Republican lawmakers who charged that the initiative — dubbed “Operation Choke Point” — was hurting legitimate businesses.
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In a letter to House Judiciary Chairman Bob Goodlatte (R-Va.), Assistant Attorney General Stephen Boyd referred to the program as “a misguided initiative.”
“We share your view that law abiding businesses should not be targeted simply for operating in an industry that a particular administration might disfavor,” says the letter, obtained by progressive activist group Allied Progress and later provided to POLITICO by Goodlatte’s office. “Enforcement decisions should always be made based on facts and the applicable law.
“We reiterate that the Department will not discourage the provision of financial services to lawful industries, including businesses engaged in short-term lending and firearms-related activities,” it adds. A nearly identical letter was sent to Sens. Thom Tillis (R-N.C.) and Mike Crapo (R-Idaho).
The Justice Department confirmed the letter was authentic but declined to comment further.
Under President Barack Obama, the department said the effort was intended to root out fraud by banks and payment processors and to cut off the banking system from wrongdoing by merchants.
Karl Frisch, executive director of Allied Progress, blasted the letter as “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,” Frisch said in a statement.
But Republicans in Congress have argued that the program hindered banks from serving legitimate businesses and tried to get officials to back off by using legislation and investigative powers.
Goodlatte and House Financial Services Chairman Jeb Hensarling (R-Texas), along with Reps. Tom Marino (R-Pa.), Blaine Luetkemeyer (R-Mo.) and Darrell Issa (R-Calif.) praised the department in a joint statement.
“We applaud the Trump Justice Department for decisively ending Operation Choke Point,” they said. “The Obama Administration created this ill-advised program to suffocate legitimate businesses to which it was ideologically opposed by intimidating financial institutions into denying banking services to those businesses.”
Last year, payday lenders sued banking regulators over what they claimed was an effort to force banks to cut ties with the firms. A federal judge handling the case had approved a schedule for discovery. Regulators have denied discriminating against specific types of businesses.
Last month, Republicans in Congress sent letters to DOJ urging it to discontinue the program, saying they were hearing complaints. They asked for an official statement saying Operation Choke Point was no longer in effect.
Frisch disagrees with the lawmakers’ view. “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,” he said.
Zachary Warmbrodt contributed to this report.