Operation Chokepoint is part of the administration’s Obamaloans strategy to wipe out the small dollar lending industry that I wrote about in January. Briefly, this initiative aims at putting pressure on banks . . . to stop doing business with third-party payment processors who enable the industry to process payments. It does this by increasing oversight requirements to such levels that it becomes unprofitable for the banks to work with them. However, it has always been intended to have a wider reach. According to the administration’s own guidance, the list of disapproved industries it is targeting for supervision include not just payday loans and credit-repair services, but also firearms/fireworks sales, ammunition sales, “As Seen on TV” products, gambling, home-based charities, pornography, online pharmaceuticals, and sweepstakes.
It’s the inclusion of pornography on that list that could be the Operation’s Achilles heel. As my colleague Hans Bader notes, certain porn stars have had their bank accounts closed. That means they might have been targeted because of their protected First Amendment, erm, activities. Moreover, targeting firearms sales has Second Amendment ramifications. Hans summarizes:
"I wonder how the Justice Department claims to reconcile these chilling investigations with the First or Second Amendments. The First Amendment can be violated by deliberately burdensome investigations, even in the civil context, when the investigation is aimed at a category of speech or speakers, see, e.g., White v. Lee, 227 F.3d 1214 (9th Cir. 2000) (unduly prolonged federal fair-housing investigation violated First Amendment). Indeed, it can violate the First Amendment so clearly that individual federal officials lose their qualified immunity and can be sued individually for damages, as the Ninth Circuit ruled in the White v. Lee decision. And as UCLA Law Professor Eugene Volokh and firearms law expert David Kopel have noted, restrictions can violate the Second Amendment even when they are aimed at sellers, rather than purchasers, of firearms. See, e.g., Kole v. Norridge (2013). So there are serious constitutional issues at stake here. Yet I see little legal commentary on the subject so far.
Even if the porn industry had a statistically greater incidence of financial shenanigans than a representative cross-section of the country as a whole, that would not justify the government or financial regulators in suppressing it. (See Forsyth County v. Nationalist Movement, 505 U.S. 123, 134 (1992) (security fee based on actual cost of providing security for demonstration violated the First Amendment, even though it was not based on government hostility to the speech as such, where it was effectively linked to the category of speech and its controversial nature); Alexander v. United States, 509 U.S. 544 (1993) (Kennedy, J., dissenting) (arguing for four justices that neutral application of forfeiture provisions after obscenity conviction could nevertheless violate the First Amendment, even though obscenity is unprotected by the First Amendment); NAACP v. Claiborne Hardware Co., 458 U. S. 886 (1982) (tort of tortious interference with contract could not be applied to otherwise-protected speech, even if the speech had the same negative effect on commerce as activity unprotected by the First Amendment, and the application of the law was in a sense neutral between speech and conduct)).