On Thursday the payday lenders trade association and its largest member company, Advance America, filed a lawsuit in federal district court to end the Department of Justice’s controversial Operation Choke Point.
The case argued that the defendant agencies (the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and the Federal Reserve Board), in cooperation with the Department of Justice, which was not named as a defendant, “are engaged in a concerted campaign to drive [the plaintiffs] out of business by exerting back-room pressure on banks and other regulated financial institutions to terminate their relationships with payday lenders.”
Launched in 2013 by the Obama administration, Operation Choke Point “was created by the Justice Department to ‘choke out’ companies the Administration considers a ‘high risk’ or otherwise objectionable, despite the fact that they are legal businesses,” according to a recent staff report from the House Oversight and Government Reform Committee.
Payday lenders as well as manufacturers, distributors, and retailers of firearms are among the companies the report identified as targeted as “objectionable” by the initiative.
In a statement released on Friday, Dennis Shaul, the CEO of the payday lending trade association, the Community Financial Services Association [CFSA], said “[i]t is unfortunate that we now must resort to litigation to protect legal, regulated businesses from this improper federal regulatory overreach.”
“We have attempted to bring our concerns regarding Operation Choke Point to the attention of federal officials and Congress,” Shaul added. “Despite this vigorous effort to inform regulators of the harmful effect of Operation Choke Point, this abuse of regulatory authority continues, and many legal businesses, including nonbank lenders who are members of CFSA, are losing their basic banking services, such as bank accounts and lines of credit.”
The complaint further charges that “The Defendant agencies’ actions were taken without observance of the procedures required by law, are arbitrary and capricious, exceed Defendants’ statutory authority, and deprive Plaintiffs of liberty interests without due process of law.”
The plaintiffs asked that the court instruct the defendant agencies that “[t]hese actions therefore must be set aside and permanently enjoined.”
Greg Hernandez, a spokesperson for the FDIC, told Breitbart News on Friday “the FDIC does not comment on pending litigation. In addition, Operation Choke Point is a Department of Justice program. The FDIC does not participate in the program.”
Mr. Hernandez did not explain why FDIC was named as a defendant in the lawsuit if it does not participate in the Operation Choke Point program.
Chuck Cooper, an attorney with Cooper & Kirk, PLLC, which represented the CFSA, said that “Operation Choke Point is a clear attempt by certain federal agencies to circumvent the law. The federal government simply cannot take regulatory action beyond what is allowed by statute, especially at the expense of legitimate businesses’ liberties and rights to due process.”
According to Cooper, “[t]his unlawful regulatory campaign against lawful, responsible business enterprises sets a dangerous precedent for our country and must be stopped.”
In a separate statement, Brian Wise, senior advisor to the U.S. Consumer Coalition, a group that has taken the lead on fighting back against Operation Choke Point through a whistleblowers website, said that “[t]his lawsuit is a good start to stopping Eric Holder and his Operation Choke Point, but it is going to take every industry targeted by this illegal program to fight back. This isn’t just an attack on the payday lending industry, this is an attack on all free market industries.”
According to its website, the CFSA was “established in 1999 as the national organization for small dollar, short-term lending or payday advances.”
Advance America, founded in 1997, is headquartered in South Carolina. It is the largest non-bank provider of cash advance services in the country. In 2013 it earned $39 million in net income on revenues of $600 million. It has over 2,300 locations in 30 states, and has more than 5,000 employees.
Breitbart News has requested comment from the two other defendant agencies (the Federal Reserve Board andthe Office of the Comptroller of the Currency), as well as non-defendant Department of Justice, on the lawsuit, but has not received a response from any of these organizations.
COMMENTS
Please let us know if you're having issues with commenting.