​House Leads Effort to End Operation Choke Point Abuse

The U.S. House of Representatives is expected to vote Thursday, February 4, on a bill curtailing Operation Choke Point, an Obama administration initiative launched in 2013 that targets certain politically disfavored businesses and industries. Together, the Competitive Enterprise InstituteFrontiers of Freedom, and the Institute for Liberty offered the following joint statement in support of H.R.766, the Financial Institution Customer Protection Act of 2015:

The Obama administration’s Operation Choke Point, which targets politically-disfavored payment processors, payday lenders, gun shop owners, and other companies, is a major abuse of executive authority and of otherwise legal businesses. This Department of Justice-led initiative, launched in 2013, uses federal banking supervisory powers to intimidate financial service providers away from businesses deemed unacceptable by bureaucrats. Other agencies, including the Federal Deposit Insurance Corporation, played major roles, as well. 

A year ago, the FDIC recognized this problem, revised its guidance to supervisors, and stepped back. However, the statutes that were abused in Operation Choke Point remain in effect, meaning that other federal agencies could use its tactics again. But now, House Republican lawmakers are leading an effort to end this abuse of power. On February 4, the U.S. House of Representatives is scheduled to vote on H.R.766 – the Financial Institution Customer Protection Act of 2015. This important legislation, sponsored by House Financial Services Committee member Blaine Luetkemeyer (MO-03), would amend the law to accomplish two important goals:

  • Prevent supervisory agencies, including the Federal Reserve, which houses the Consumer Financial Protection Bureau (CFPB), from ordering the closure of a banking account without material reason. (Note that Choke Point involved allegations of “reputational risk.”)
  • Amend the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) to ensure that federal agency subpoena power could not be used in fishing expeditions.

Both these steps were recommended by the Competitive Enterprise Institute in an in-depth report on Operation Choke Point in 2014. The Competitive Enterprise Institute, Frontiers of Freedom, and the Institute for Liberty all support passage of H.R.766 to help prevent Choke Point tactics from being used by any federal banking agency in the future.