-
Top Republicans on the House Financial Services Committee are asking federal regulators to cease all activity related to the Justice Department's "Operation Choke Point" and any related investigations.
April 9 -
After nearly two years, the Justice Department so far has accused just one bank of facilitating consumer fraud. And the aftermath of that case suggests that prosecutors' strategy is not as effective as they hoped it would be.
December 3 -
Internal memos and emails show that the controversial probe was not exclusively focused on payday lending. At the same time, Justice officials did not think it was their problem if lawfully operating payday lenders lost their banking relationships as a result of the investigation.
May 30
WASHINGTON Department of Justice attorneys did not engage in misconduct when pursuing consumer-fraud investigations through Operation Choke Point, an internal department probe has concluded.
Last year GOP lawmakers such as Rep. Blaine Luetkemeyer, R-Mo., had called on the DOJ to examine allegations that lawyers wrongly pursued legal online payday lenders and forced banks to cut ties with legitimate businesses.
But in a July 7 letter to Luetkemeyer, a department official said while evidence points to DOJ attorneys holding negative opinions of payday lenders, there was no evidence they abused their statutory authority. The letter was first reported and was posted online by the Huffington Post. A DOJ spokesman confirmed the letter's authenticity.
The letter, written by an official in the department's Office of Professional Responsibility, said concerns about how Choke Point has affected online lending is "understandable" since department memoranda "at times seemed to disparage payday lending practices" and "certain attorneys may have viewed Internet payday lending in a negative light."
But "the relatively few Operation Choke Point subpoenas related to Internet payday lending were well supported by facts showing that the targets of the subpoenas allegedly were involved in mass-market fraud schemes," wrote G. Bradley Weinsheimer, deputy counsel in the professional-responsibility office.
Choke Point investigations were supported by the 1989 Financial Institutions Reform, Recovery, and Enforcement Act, according to the letter. Lawmakers and other critics have accused the authorities of misusing FIRREA since DOJ attorneys have pursued cases where banks did not suffer losses from alleged fraud.
"All courts that have addressed the issue have determined that FIRREA properly may be used to address fraud schemes in which a financial institution suffered no actual monetary loss but increased institutional risk to itself by participating in or facilitating the fraud scheme," Weinsheimer wrote.
He added that his office also "did not find evidence of any effort to improperly pressure lawful businesses" to end client relationships, and that online payday lending made up a relatively small portion of the Choke Point cases.
"To the extent that civil division attorneys involved in Operation Choke Point investigated Internet payday lending, their focus appeared to be on only a small number of lenders they had reason to suspect were engaged in fraudulent practices," Weinsheimer wrote.
In a statement emailed to American Banker, the DOJ spokesman, Patrick Rodenbush, said the report backs up what the DOJ has said "consistently."
"The purpose of Operation Choke Point was to combat mass-market consumer fraud in the banking system," he said. "The report found that the department's lawyers based each of their investigations on specific evidence of fraud victimizing consumers. OPR found no evidence that anyone, at any time, targeted lawful businesses, and no evidence that these efforts compelled banks to end their relationships with any lawful business."
