As we have mentioned in previous posts, Operation Choke Point is a federal Financial Fraud Enforcement Task Force, created in 2009, including law enforcement and regulators from the Department of Justice, the Federal Trade Commission, and Federal Deposit Insurance Corporation. To attack financial fraud, the Task Force has been issuing subpoenas to banks for financial information on their clients and, depending on the results, investigating further. The Task Force’s methods are now coming under attack. In January, Congressman Darrell Issa (R-CA), Chairman of the House Oversight and Government Reform Committee, and Congressman Jim Jordan (R-OH), Chairman of the Economic Growth Subcommittee, sent a letter to Attorney General Holder stating that
“[t]he [House Oversight and Government Reform] Committee is concerned that both the goal and mechanisms of Operation Choke Point may constitute a serious mismanagement and abuse of the Department’s FIRREA [Financial Institution Reform and Recovery Act of 1989] authority.”
While the Attorney General has not yet responded to the letter, the Guardian published an article yesterday further discussing the potentially harmful impacts of Operation Choke Point on low-income Americans. The article, while noting that some believe the industry has a reputation for “predatory rates” and “exploitation of low-income Americans,” makes it clear that payday lenders are often the only option for low-income Americans who need loans. As lenders continue to support those Americans who have few other options, we expect to see more regulators becoming concerned with Operation Choke Point. We also expect that, as a matter of consumer protection, State Attorneys General may become interested in ensuring that low-income constituents can receive fair loans though online and payday lenders.