Legislation introduced in response to Operation Choke Point

Legislation defining the federal government’s procedure to force a bank to end its relationship with a suspicious business has been introduced.

The Financial Institution Customer Protection Act — a reaction to Operation Choke Point — prohibits federal banking regulators from requesting or ordering financial institutions from terminating a customer’s account unless the regulator has material reason and writes it down.

“This legislation is straightforward by stating that federal banking agencies must put in writing any suggestion to terminate a customer’s banking account and by requiring agencies to define terms by which they regularly use in the examination process,” said U.S. Rep. Blaine Luetkemeyer, the Missouri congressman who introduced the bill last week.

Since the Committee on Oversight and Government Reform review of Operation Choke Point found that forcing a bank to terminate its relationship with a business created reputational risk sufficient to trigger a federal investigation, House Bill 5758 also requires the feds to define the term “reputation risk.”

The bill aims to provide clarity and legal bounds, requiring federal banking agencies to issue annual reports to congress. Yet, in cases of national security those same agencies are not required to give reasoning to a suspect after cutting them off from their bank account — the same issue that brought about the House investigation at the beginning. In fact, it’s unclear how many businesses — legitimate and fraudulent — were effected by the operation, so Leutkemeyer created a platform for businesses that believe they were targeted by Operation Choke Point to tell their story.

Operation Choke Point, a Justice Department effort that started in 2013 to prevent fraudulent merchants from accessing consumers’ bank accounts, caught flak for its expansive list “high risk” merchants and murky legal boundaries.

In the search of fraudsters, investigators looked for patterns of possible fraudulent behavior. Initially the operation targeted businesses offering phony financial services in the form of payday loans, debt relief, health care discount cards, and government grants.

Primarily the Justice Department probed online businesses, but it spread across a wide range of industries from firearm and ammo, porn, lottery, get rich quick products, coins, fireworks, gambling and more.

Luetkemeyer said he is hopeful that his legislation will pass since both the Federal Deposit Insurance Corporation and the Justice Department are seemingly on board to revise procedure. Earlier this month both agencies agreed to conduct an internal investigation into their involvement in the operation.

“I am even more positive that with the introduction of this legislation, Congress will be able to work in a bipartisan fashion to quickly put an end to this program,”Luetkemeyer said.