At last year’s super successful GA Fly-In, ERA stormed Capitol Hill in search of relief from the Obama Administration’s Operation Choke Point initiative. There attendees heard from our keynote presenter Chairman Pete Session (R-TX) of the House Rules Committee who enlightened the industry about the legislation to curb the scope of the Department of Justice’s “Operation Choke Point” efforts. We then met with key staffers from the offices of Senators Ted Cruz (R-TX) and Mike Lee (R-UT) responsible for the Operation Choke Point mitigation efforts in the US Senate.
After our briefings, we walked the halls of Congress to advocate for the Financial Institution Customer Protection Act (H.R. 766) in the House and its mirror companion legislation in the Senate (S. 2790). These critical pieces of legislation where our best hope to ensure that ERA and its members continued to enjoy a world class payment ecosystem as regulators in the Obama Administration looked at ways to cut processing for those they deemed to be “bad actors”.
So what’s up with Operation Choke Point now that President Trump is in office? I am glad someone recently asked me that question and I thought I would share with you the answer in the blog post below.What Is Operation Choke Point Anyway?
Operation Choke Point is an initiative that was established in 2013 by the U.S. Department of Justice (DoJ) and administered by the Federal Deposit Insurance Corporation (FDIC). The program uses intimidation to force banks to cease financial ties with businesses the government views as high-risk merchants, including “As Seen on TV,” Telemarketing, Sweepstakes and Internet sales. The FDIC is able to achieve this by threatening banks and payment processors with increased federal scrutiny. The mere threat has been enough to force the termination of relationships between small business owners and banking institutions. Being shut out of the banking system results in businesses almost instantly failing without due process, and often without any notice or proof of wrongdoing. Operation Choke Point has had a chilling effect and left marketers with less access to the financial services they need to survive and thrive in today’s dynamic marketplace.
Additional Operation Choke Point Background Information
Since the summer of 2013, the Operation Choke Point fight has played out primarily through regulatory action and within industry bodies. As knowledge of and frustration with the program has grown, Congress has held hearings, and a legislative remedies have been attempted in both the House and the Senate.
Congressman Blaine Luetkemeyer (R-MO) introduced, and the House passed, HR 766, The Financial Institution Customer Protection Act, by a vote of 250 – 169 in 2016. Following passage of the House bill, Senators Mike Lee (R-UT) and Ted Cruz (R-TX) introduced S.2790, which was sent to the Senate Banking Housing and Urban Affairs Committee. Both bills where designed to terminate Operation Choke Point by prohibiting federal agencies that oversee banks from requesting or ordering banks to terminate customer accounts “unless the regulator has material reason.” It also requires banking regulators to put in writing, any request for account terminations and to file an annual report to Congress.
President Trump’s Impact Operation Choke Point
The Trump effect on Operation Choke Point has been significant to so far. After last year’s fly-in, the contentious electoral battle between President Trump and his Democratic opponent Hillary Clinton sucked much of the oxygen out of legislative battles in Congress. Effectively the congressional session expired before either of our legislative vehicles made it past President Obama’s signature into law. The good news is that there is an expectation that these remedies will be reintroduced in friendlier legislative environment of this congressional session. I expect that the President will be supportive of the effort if and when this issue makes it to his desk. Passage of this legislative proposal will represent a good long term fix.
However, in the short term there is also good news. President Trump nominated Senator Jeff Sessions (R-AL) as his designee for US Attorney General. During his confirmation he was asked about Operation Choke Point and replied that while he didn’t know much about it, that such a program would be “hard to justify”.
Let’s hope that the good news on this issue continues moving forward. There is still much work to finish to ensure this issue does not come back to haunt the industry in the years to come and under a different administrations.
Bill McClellan joined ERA in January 2003 as director of government affairs. Prior to joining the association, Bill worked as a lobbyist at the Georgia Automobile Dealers Association, covering the state legislature and Georgia's congressional delegation. Before working for the GADA, Bill managed political campaigns at both the congressional and state constitutional levels