House Financial Services Committee Passes Legislation Against Operation Choke Point
10/12/2017 8:37:00 PM
The legislation will end an Obama-era program that discourages banks from servicing certain licensed, legally operating industries.
The House Financial Services Committee approved an amended version of legislation that prevents a recurrence of Operation Choke Point, a program described by one government official as a “misguided initiative” on Thursday, Oct. 12.
Committee Chairman U.S. Rep. Jeb Hensarling, R-Texas, said the committee would pass the legislation on to the full U.S. House of Representatives with a favorable recommendation.
The amended Financial Institution Consumer Protection Act, (HR 2706), sponsored by U.S. Rep. Blaine Luetkemeyer, R-Mo., was reintroduced earlier this year. The legislation prevents the Federal Deposit Insurance Corporation (FDIC) and U.S. Department of Justice (DOJ) from cutting off banking services to certain licensed, legally operating industries, including debt collection.
"This is a very real issue and one that must be addressed…the blanket targeting of entire industries is entirely inappropriate,” Luetkemeyer said.
Federal agencies, including the DOJ, under the administration of President Donald Trump, also committed to ending Operation Choke Point in response to a request from Republican members of Congress in August.
In a letter to U.S. Rep. Bob Goodlatte, R-Va., chairman of the House Judiciary Committee, and the other Republican members of Congress, Assistant Attorney General Stephen Boyd referred to Operation Choke Point as a “misguided initiative,” ACA International previously reported.
Boyd also said in his response to the lawmakers’ letter that the DOJ’s bank investigations under Operation Choke Point have concluded and “the initiative is no longer in effect, and it will not be undertaken again.”
Luetkemeyer’s amended legislation includes several provisions to protect legitimate lawful businesses from actions that occurred under Operation Choke Point going forward.
According to the committee memorandum from the markup, the legislation includes provisions that: “Prohibit a federal banking agency from directing a depository institution to terminate an account, absent a material reason; the bill requires a federal banking agency to provide a depository institution written justification of any request to terminate or restrict a customer account, except in instances of national security; requires the federal banking agencies to issue an annual report to Congress that describes the number of customer accounts the agency requested or caused to be closed and the legal authority on which the agency relied."
“The checks and balances in this legislation would help to ensure accountability among the regulators and would in no way hinder the ability of the executive branch from going after individuals or businesses suspected of fraudulent activity,” Luetkemeyer said. “The substitute amendment and underlying bill take a responsible approach to curbing the malpractice we’ve seen in Operation Choke Point.”
U.S. Rep. Brad Sherman, D-Calif., said it is “critically important” to pass the legislation.
U.S. Rep. Maxine Waters, D-Calif., the ranking member of the House Financial Services Committee, said the original version of the bill would have made it more difficult for the DOJ to “prosecute cases of financial fraud” and that she appreciates Luetkemeyer’s efforts to scale back the legislation.
However, Waters said she also remains concerned the revised text will not fully address the root causes of bank account closures.
“I hope this language can be refined before this bill can be moved to the floor,” Waters said.
Luetkemeyer stressed that the language in the bill does not prevent regulators from doing their jobs.
“All we’re trying to do is put in place processes that protect individuals’ ability to do business and compete in our economy,” he said.
Luetkemeyer reintroduced HR 2706, the Financial Institution Consumer Protection Act, in the 115th Congress.
In April 2015, ACA International’s Board of Directors unanimously voted to support legislation and policy changes that would bring an end to Operation Choke Point. ACA International will continue to follow the status of the legislation and keep ACA members apprised of developments.
Follow ACA on Twitter @ACAIntl and @acacollector or Facebook for news and event updates. ACA’s LinkedIn Group includes news updates, member discussions, event promotions, jobs and more. Visit the group page and request to join today. Subscribe to ACA Daily, Collector magazine and update your email subscription preferences by visiting the publications page. ACA members can get email notifications when each new digital issue of Collector magazine is available by logging in here; members and nonmembers can also purchase a print subscription. Nonmembers can create a guest profile on ACA’s website to subscribe to available publications.