Federal Judge Dismisses CFPB’s Attempt to Quash ‘Operation Choke Point’ Lawsuit

Published January 24, 2017

A federal judge is scheduled to hear arguments from lawyers representing a consumer mortgage company who hope to present evidence alleging a federal government agency participated in a controversial program using banking and financial regulations to force business owners out of selling politically disfavored products and services.

Lawyers representing the Consumer Financial Protection Bureau (CFPB) are seeking to prevent Nationwide Biweekly Administration, Inc., a company sued by CFPB in 2015, from presenting evidence of CFPB’s participation in Operation Choke Point (OCP) to Judge Richard Seeborg of the U.S. District Court for the Northern District of California.

In February, CFPB lawyers are scheduled to present arguments seeking dismissal of the company’s evidence and a summary judgement in favor of the government agency.

OCP was a federal government program organized by the U.S. Department of Justice to use banking regulations to shut down companies and industries disfavored by the government, such as firearm dealers and certain types of financial services.

‘Part of a Political Machine’

Brian Wise, president of the U.S. Consumer Coalition, says the Barack Obama administration used government agencies such as CFPB to advance a political agenda.

“Industries have had to face the fact that these regulators are a part of a political machine that is solely focused on their destruction,” Wise said. “The Operation Choke Point initiative was ended in January of 2015. However, components of the program were adopted by the CFPB and, through their examination process, began bullying financial institutions to end relationships with industries they didn’t like.”

Weaponizing the Government

Wise says OCP relied on “intimidation” and other tactics to control industries government officials didn’t like.

“Operation Choke Point represented a turning point in the process of regulating industries, where the government became an arbiter of winners and losers in the marketplace,” Wise said. “The program focused on depriving any certain industry of any due process and used tactics of intimidation to take away basic services from these industries. The impact that OCP had and continues to have is that industries can no longer count on the government to serve the American consumers.”

‘Strong-Arming’ Banks

John Berlau, a senior fellow at the Competitive Enterprise Institute, says lawmakers should not use regulatory agencies to persecute business owners.

“If the government thinks that someone or something committed a crime, they should charge them for committing a crime,” Berlau said. “They should not go through the back door. They shouldn’t be strong-arming a bank to not do business with an entire industry, be it payday loans or pornography.

“They are basically saying, ‘Don’t deal with these industries, because they are more prone to fraud,'” Berlau said. “The whole thing is to circumvent due process and rule of law. This is just a platform to go after politically incorrect industries.”