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Regulators File For Summary Judgment in Operation Choke Point Case

A pair of federal regulators that are being sued by a group of payday lenders for their role in Operation Choke Point filed a motion for summary judgment yesterday, arguing that the plaintiffs have not suffered the harms they claimed to have suffered because of the initiative and, even if they have suffered, they can’t prove those losses were directly related to actions taken by the defendants.

The Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency both filed motions in federal court yesterday seeking summary judgment in the case. The plaintiffs are accusing the defendants of pressuring the financial institutions the defendants regulate to put companies out of business through Operation Choke Point, which was a Justice Department initiative to cut off access to financial services for certain types of companies, including payday lenders and debt collectors, that were thought to be at a higher risk for illegal activities such as fraud and money laundering. The plaintiffs alleged that more than 80 banks stopped working with payday lenders as a result of Operation Choke Point.

A copy of the FDIC’s motion for summary judgment can be accessed by clicking here.

Last month, documents that were unsealed revealed “blatant discrimination and bias” from officials at the agency.

In making its case for summary judgment, the FDIC put forth four arguments:

  • The plaintiffs lack standing to sue because they can’t prove the defendants are responsible for the actions of the banks that shut down their accounts
  • That plaintiffs continue to have access to the banking system, as they always have had
  • There is no evidence from any bank pointing to the defendants as the source of a decision to close an account
  • The defendants have never disparaged the plaintiffs

The FDIC neither prohibits nor discourages banks from maintaining accounts for payday lenders, provided that the banks manage the associated risks properly. The FDIC has made that policy clear on numerous occasions for more than five years now—i.e., before this suit was filed—and Plaintiffs’ reliance on documents dating from 2013 and prior has no bearing on the question of what the FDIC’s policy is now. Plaintiffs’ continued robust health, and continued profitability, simply reinforces what is already obvious: there is no regulatory “campaign” against payday lenders.

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