By Benjamin Goad - 06/06/14 10:33 AM EDT
The payday lending industry said Friday it is suing a host of U.S. financial regulators over the Obama administration’s secretive “Operation Choke Point,” meant to pressure banks to cut ties with legally questionable businesses.
The initiative has drawn fire from some congressional Republicans and business groups who say legitimate companies are being targeted.
“We have attempted to bring our concerns regarding Operation Choke Point to the attention of federal officials and Congress,” said Dennis Shaul, the group’s chief executive.
“Despite this vigorous effort to inform regulators of the harmful effect of Operation Choke Point, this abuse of regulatory authority continues, and many legal businesses, including nonbank lenders who are members of CFSA, are losing their basic banking services, such as bank accounts and lines of credit,” he added.
In a lawsuit filed Thursday night, the group alleges that regulators are “exerting back-room pressure” on banks to sever their ties with payday lenders.
As a result, more than 80 banks have terminated their dealings with the industry group’s member companies “and other law-abiding payday lenders.”
“The Defendant agencies’ actions were taken without observance of the procedures required by law, are arbitrary and capricious, exceed Defendants’ statutory authority, and deprive Plaintiffs of liberty interests without due process of law,” the lawsuit alleges. “These actions therefore must be set aside and permanently enjoined.”
Listed as defendants in the case, filed in U.S. District Court in Washington, D.C., are the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System.
The Justice Department, which is reportedly leading Operation Choke Point, was not named.