Republican senators proposed legislation on Dec. 10 that would stop federal regulators from manipulating banks to choke off certain industries.
It’s an updated version of legislation proposed in 2016 in response to Operation Choke Point, a program under President Barack Obama that pressured banks and other financial institutions to withhold services from sellers of firearms, “payday” lenders, and other lawful business enterprises.
“This bill safeguards the American people and small businesses from being unconstitutionally cut off from their financial institutions for not falling in line with the political whims and leanings of whoever is in control of the executive branch,” said Sen. Ted Cruz (R-Texas), who sponsored the legislation, in a press release.
“Under the previous administration, government officials at agencies such as the Department of Justice (DOJ) and the Federal Deposit Insurance Corporation (FDIC) abused their power to become a partisan arm of the administration,” he said.
In addition to Cruz, co-sponsors of the Financial Institution Customer Protect Act of 2019 include Sens. Mike Crapo (R-Idaho), John Kennedy (R-La.), Thom Tillis (R-N.C.), Jim Inhofe (R-Okla.), Mike Lee (R-Utah), Cindy Hyde-Smith (R-Miss.), John Cornyn (R-Texas), Ben Sasse (R-Neb.), and Mike Braun (R-Ind.).
The FDIC was especially active in the Obama-era program, as was revealed in a court case against FDIC for its involvement. The agency’s Atlanta regional director, Thomas Dujenski, said in an email cited in court documents, “I literally cannot stand pay day lending.” All banks in the Atlanta region terminated services to the temporary lenders.
Similarly, the agency’s Chicago regional director, Anthony Lowe, testified that he and other regional directors were told by officials in the FDIC’s Washington office that “if a bank was found to be involved in payday lending, someone was going to be fired.”
The newly proposed legislation “prohibits a federal banking agency from formally or informally suggesting, requesting, or ordering a depository institution to terminate either a specific customer account, or group of customer accounts, or otherwise restrict or discourage it from entering into or maintaining a banking relationship with a specific customer or group of customers” unless the agency has a “material reason to do so” that “is not based solely on reputation risk to the institution,” according to Cruz’s statement.
“The ‘material reason’ criterion shall be satisfied if an agency believes that a specific customer or group of customers poses a threat to national security, including any belief that they are involved in terrorist financing,” according to the statement.
The House of Representatives approved a companion bill to the present proposal in 2018. Rep. Blaine Luetkemeyer (R-Mo.) sponsored the measure.
There are more than 56,000 licensed firearms dealers in the United States and nearly 8,000 individuals are permitted to buy and sell firearms as pawnbrokers, according to the San Francisco-based Giffords Law Center to Prevent Gun Violence.
Payday lenders typically make loans up to $1,000, with repayment to be made within two weeks. Annual interest rates can run as high as 400 percent. There are an estimated 23,000 pay-day lenders in the United States.
One in three college-aged individuals has considered seeking payday loans, despite the short repayment periods and high annual interest costs, according to a 2018 survey by CNBC.
“Federal regulators are supposed to enforce the law, not act as partisan hacks trying to impose their own agenda on the businesses they oversee,” Kennedy said in the press release.
“This legislation prevents federal banking agencies from discriminating against lawful businesses, large or small, just because their customers or practices don’t adhere to the same political views of whoever controls the administration,” he said.
“No bureaucrat should abuse the public trust by using their regulatory powers to impose their own personal preferences on the American people,” Lee said in the press release. “It is vital that government power be wielded transparently and accountably, and that those targeted by government be made aware of their penalization and its justification, and have the ability to challenge that action.”
“Obama-era policies, such as Operation Choke Point, represented a direct assault on Second Amendment rights,” Hyde-Smith said in the press release. “This strong legislation would act to protect those rights, as well as the spirit of free enterprise that makes the American economy so strong.”