“Operation Choke Point” Lawsuit Against Federal Bank Regulators Dismissed

Jun 26, 2019

The multi-year lawsuit alleging regulatory pressure to close payday lender bank accounts has been dismissed, according to the Office of the Comptroller of the Currency.

Advance America et al. decided to dismiss the OCC from its lawsuit, alleging that federal banking regulators pressured banks to terminate payday lender bank accounts.

This action puts an end to the 2014 lawsuit that payday lenders filed against federal regulators in Operation Choke Point, the Federal Deposit Insurance Corporation (FDIC).

Part of the deal included an acknowledgment that “certain employees acted in a manner inconsistent with FDIC policies with respect to payday lenders,” the agency stated. Though the agency was quick to warn that the statement did not represent a change in policy, it did show that some of the acts by Operation Choke Point were unlawful in nature.

Background on the Complaint

The Federal Reserve Board of Governors and the Office of the Comptroller of the Currency (OCC), and several payday lenders filed a complaint against the FDIC, alleging that the federal banking regulators participated in the Department of Justice’s (DOJ) Operation Choke Point. They claimed that operation forced banks to end their business relationships with payday lenders.

Eventually, the plaintiffs agreed to dismiss the Federal Reserve, the OCC, and the FDIC, and then, reached a deal with the plaintiffs. In exchange for the plaintiffs’ dismissal of the suit against the FDIC, the agency promised to issue a statement giving a synopsis of its long-standing policies and guidance regarding the circumstances in which it recommends that a bank terminate a customer’s deposit account.

The Other Actions the FDIC Plans to Take

In addition to its acknowledgments, the FDIC did make efforts to remedy the situation. The agency took steps to clarify and reinforce its policies, including the removal of the lists of examples of higher-risk merchant categories that were previously included in official FDIC guidance.

Additionally, the FDIC adopted an internal policy that governs the circumstances in which the agency may recommend that a financial institution terminate a customer’s deposit account.

Finally, the FDIC promised to conduct more training of its examination employees on its policies by the end of 2019. The training aims to ensure that examination employees comply with the highest standards of conduct and law.

In Conclusion

The resolution of the lawsuit shows that Operation Choke Point won’t continue. If this is the case, then this could be the end of politicizing bank examinations for the sole reason of limiting perceived less-than-desirable but legal businesses from accessing the national banking system. Hopefully, this will level the playing field and remove some pressure from those that offer payday lending services.

Apply for Merchant Account Services

Any business that needs credit card processing or loans should contact eMerchantBroker.com. EMB works with high-risk businesses and those with no credit processing history. Additionally, it offers loans and merchant cash advances for businesses of all sizes. Apply online today. Eligible applicants get approved in as little as a few days.

Let us help you get a high risk merchant account today!

Get Started

Award winning.

  • 2012
  • 2013
  • 2014
  • 2015
  • 2016

Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

Live Chat