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Short-Term Lenders File For Emergency Relief from Illegal Operation Choke Point Program

Monday, November 28, 2016 • CFSA

Last Wednesday, November 23, the Community Financial Services Association of America (CFSA) and Advance America filed an emergency request for preliminary injunctive relief with the U.S. District Court for the District of Columbia.

The emergency filing asks the Court to put an immediate stop to the illegal federal campaign known as Operation Choke Point. CFSA and Advance America are co-plaintiffs in a case, CFSA et al. v. Federal Deposit Insurance Corp. et al., No. 1:14-cv-00953, which is pending discovery before the same court.

The emergency filing results from a stepped up government campaign of strong-arm tactics against banks forcing them to end business relationships with payday lenders. Members of CFSA, including Advance America, are now reaching a crisis stage; they have lost dozens of long-standing, essential banking relationships -- including major terminations in recent weeks -- and have been turned away from scores of other financial institutions.

The emergency filing contains the following:

The following is a statement from CFSA CEO Dennis Shaul:

“The need for immediate relief is more urgent than ever. Our largest member very recently had its final national banking relationship terminated. This effectively cuts off our member’s access to basic banking services for more than 1,200 of its stores and affects even its ability to pay employees and vendors.  Without an injunction against Operation Choke Point, I firmly believe some CFSA members will be forced to curtail their operations dramatically and others will have to shut down all together.”

The emergency court filing declares:

“This is a case of federal regulatory officials arrogating to themselves the illegitimate power to deprive Americans of their good names, their livelihoods, and their constitutional rights. As alleged in our complaint, for over three years leading officials at the Defendant Agencies—the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), and the Board of Governors of the Federal Reserve System (“the Board”)—have been carrying out a back-room campaign to coerce regulated banks to terminate the accounts of customers in industries that are disfavored by the Defendants. Defendants have acted without statutory authority, without observing the formal procedures required by law, and without providing the affected parties with any notice or opportunity to defend themselves, their livelihoods, and their good names.”

Although the Defendants’ campaign of regulatory intimidation has already destroyed some smaller businesses, Advance America had, until now, been able to find national banks willing to continue doing business. The situation has become life-threatening. Immediate judicial intervention is thus needed if irreparable harm is to be averted.”

Additional Background Information

On June 6, 2014, CFSA and Advance America filed a lawsuit against the federal government seeking to end Operation Choke Point and the improper regulatory overreach to shut down lawful industries. Fifteen months later, the Court ruled it has jurisdiction to entertain the suit brought against the defendant federal agencies and that the Due Process Clause of the Fifth Amendment protects against the sort of government misconduct that CFSA and Advance America has alleged. Since the initial ruling, the parties in the case have been awaiting further ruling from the Court before discovery proceedings may ensue.

In September 2015, the FDIC inspector general confirmed that FDIC officials had used their regulatory leverage to coerce banks to close the accounts of law-abiding companies – specifically short-term lenders. The IG report established beyond question that these FDIC regulators were covertly pressuring banks to choke off these lenders’ access to banking services in a deliberate attempt to drive an entire industry out of business.

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Short-Term Lenders File For Emergency Relief from Illegal Operation Choke Point Program

Monday, November 28, 2016 • CFSA

Last Wednesday, November 23, the Community Financial Services Association of America (CFSA) and Advance America filed an emergency request for preliminary injunctive relief with the U.S. District Court for the District of Columbia.

The emergency filing asks the Court to put an immediate stop to the illegal federal campaign known as Operation Choke Point. CFSA and Advance America are co-plaintiffs in a case, CFSA et al. v. Federal Deposit Insurance Corp. et al., No. 1:14-cv-00953, which is pending discovery before the same court.

The emergency filing results from a stepped up government campaign of strong-arm tactics against banks forcing them to end business relationships with payday lenders. Members of CFSA, including Advance America, are now reaching a crisis stage; they have lost dozens of long-standing, essential banking relationships -- including major terminations in recent weeks -- and have been turned away from scores of other financial institutions.

The emergency filing contains the following:

The following is a statement from CFSA CEO Dennis Shaul:

“The need for immediate relief is more urgent than ever. Our largest member very recently had its final national banking relationship terminated. This effectively cuts off our member’s access to basic banking services for more than 1,200 of its stores and affects even its ability to pay employees and vendors.  Without an injunction against Operation Choke Point, I firmly believe some CFSA members will be forced to curtail their operations dramatically and others will have to shut down all together.”

The emergency court filing declares:

“This is a case of federal regulatory officials arrogating to themselves the illegitimate power to deprive Americans of their good names, their livelihoods, and their constitutional rights. As alleged in our complaint, for over three years leading officials at the Defendant Agencies—the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”), and the Board of Governors of the Federal Reserve System (“the Board”)—have been carrying out a back-room campaign to coerce regulated banks to terminate the accounts of customers in industries that are disfavored by the Defendants. Defendants have acted without statutory authority, without observing the formal procedures required by law, and without providing the affected parties with any notice or opportunity to defend themselves, their livelihoods, and their good names.”

Although the Defendants’ campaign of regulatory intimidation has already destroyed some smaller businesses, Advance America had, until now, been able to find national banks willing to continue doing business. The situation has become life-threatening. Immediate judicial intervention is thus needed if irreparable harm is to be averted.”

Additional Background Information

On June 6, 2014, CFSA and Advance America filed a lawsuit against the federal government seeking to end Operation Choke Point and the improper regulatory overreach to shut down lawful industries. Fifteen months later, the Court ruled it has jurisdiction to entertain the suit brought against the defendant federal agencies and that the Due Process Clause of the Fifth Amendment protects against the sort of government misconduct that CFSA and Advance America has alleged. Since the initial ruling, the parties in the case have been awaiting further ruling from the Court before discovery proceedings may ensue.

In September 2015, the FDIC inspector general confirmed that FDIC officials had used their regulatory leverage to coerce banks to close the accounts of law-abiding companies – specifically short-term lenders. The IG report established beyond question that these FDIC regulators were covertly pressuring banks to choke off these lenders’ access to banking services in a deliberate attempt to drive an entire industry out of business.

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