FDIC Backs off Operation Choke Point (Jan. 29, 2015)
Critics of the DOJ’s controversial Operation Choke Point, which encourages financial institutions to scrutinize clients that operate certain types of businesses, such as payday lenders and firearms sales, may welcome the latest news from the FDIC. Yesterday the agency released a Financial Institution Letter, telling financial institutions to take a risk-based approached in assessing individual customer relationships rather than declining banking services to entire categories of customers.
“Financial institutions that properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing services to any category of customer accounts or individual customers operating in compliance with applicable laws,” the FDIC said in a release. “FDIC examiners must provide notice in writing for any case in which an institution is directed to exit a customer relationship.”
The FDIC also announced a new, dedicated toll-free number, 800.756.8854, and email address, bankingservicesOO@fdic.gov, for the Office of the Ombudsman for institutions concerned that FDIC personnel are not following FDIC policies on providing banking services. Communications with the ombudsman are confidential.
U.S. Representative Blaine Luetkemeyer (R-Mo.), who’s been an outspoken opponent of Operation Choke Point, praised the agency for making immediate policy changes. “Today is a turning point in the fight against Operation Choke Point,” Rep. Luetkemeyer said yesterday after meeting with FDIC Chairman Martin J. Gruenberg and Vice Chairman Thomas M. Hoenig. “Not only did the chairman and the vice chairman acknowledge wrongdoing within the organization, but they have accepted many of the policies put forth in my legislation, the Financial Institution Customer Protection Act,” he said.
The agency also joined Rep. Luetkemeyer in his call for the FDIC Inspector General to conduct a formal investigation of Operation Choke Point and any staff who have played or may have played a role in the program, he added.
Rep. Luetkemeyer introduced the Financial Institution Customer Protection Act in the last congressional session and plans to reintroduce the bill, which would codify the FDIC’s policy changes and require other federal regulators follow its lead, namely that agencies cannot request or order a financial institution to terminate a banking relationship unless the regulator has material reason and puts that request in writing.