A congressional probe found evidence Federal Deposit Insurance Corporation officials forced banks to sever ties to legal businesses with negative public images.
Regulators pressured the banks to cut off the accounts of entire industries whose practices they “disfavored” as part of a multi-agency program created in 2013 by the Justice Department and known as Operation Choke Point.
Rep. Darrell Issa, chairman of the House Committee on Oversight and Government Reform, and Rep. Jim Jordan, chairman of the panel’s subcommittees, said entire industries were being “disfavored” without regard for the performance of individual companies.
Issa is a California Republican. Jordan is an Ohio Republican.
Justice officials said the purpose of the program is to shut down a variety of businesses they think pose a “reputational risk” to the banks, according to a May congressional report.
In letters made public Oct. 17 to the Federal Reserve Board and the Comptroller of the Currency, Issa and Jordan cited passages from a 2013 FDIC letter in which a regional director “effectively ordered a target bank to terminate all relationships with payday lenders.”
The regional director added that “we have generally found that activities related to payday lending are unacceptable for an insured depository institution.”
Besides payday lenders, other merchants targeted by Operation Choke Point including gun and ammunition retailers, coin dealers and tobacco companies.
Issa and Jordan accused the Federal Reserve of being complicit in Justice Department efforts to pressure big banks to withdraw services from legal industries.
SunTrust Bank, the 17th largest bank in the country, announced earlier this year its decision to end all dealings with “payday lenders, pawn shops and dedicated check-cashers” due to “compliance requirements.”
“The board’s enforcement of a compliance regime that forces banks to sever all relations with legal and legitimate customers is totally unacceptable,” Issa and Jordan said in their letters.
Their letters also accused the Comptroller, which is the “primary supervisor” of all national banks, of participating in Operation Choke Point.
Issa and Jordan demanded to see all communications and documents within or between the agencies and the Justice Department that mentioned Operation Choke Point or any of the targeted industries in their requests.
