GOP Senators Push Legislation to Prevent 'Operation Choke Point'

Republican senators this week introduced legislation that would prevent credit unions and banks with more than $10 billion in assets from declining to provide services to “constitutionally protected industries and law-abiding businesses,” such as gun manufacturers.

The bill, S. 565, was introduced by Sen. Kevin Cramer (R-N.D.) and is cosponsored by 24 senators, including half of the Republicans on the Senate Banking Committee.

“As Chairman of the Banking Committee, I repeatedly pressed financial institutions and federal regulators for fair treatment of lawfully operating companies, and I will continue to provide strong oversight on this issue,” former Senate Banking Chairman Mike Crapo (R-Id.), one of the bill’s cosponsors, said. “Companies and customers complying with federal and state law must have access to credit and services based on their creditworthiness, rather than social or political pressure.”

The bill is, in part, an attempt to ensure that the Biden Administration does not attempt to reinstitute “Operation Choke Point,” an Obama Administration project.

That project was intended to hold financial institutions accountable for processing transactions they knew were fraudulent. Critics said that program allowed financial institutions to decide not to do business with controversial companies, such as payday lenders and gun-related firms. Credit unions insisted that they did not participate in the project.

In its closing days, the Trump Administration’s Office of the Comptroller of the Currency announced the “Fair Access Rule,” a rule that would prohibit programs like Operation Choke Point.

“Operation Choke Point sought to eliminate legally operating American businesses only because they did not fit within the Obama Administration’s political ideals,” Rep. Blaine Luetkemeyer (R-Mo.) said at the time. “The Fair Access Rule will ensure all legal American companies have full and fair access to financial services and the economic freedom they deserve.”

However, upon taking office, the Biden Administration announced its intention to delay the rule in order to reevaluate it.

During the last Congress, the issue also became entangled in the controversy over providing a safe harbor to financial institutions that serve marijuana-related businesses. Some lawmakers proposed combining the two issues into one bill in order to make the marijuana banking bill more attractive to Republicans. However, that plan never was adopted.

In addition to prohibiting large banks and credit unions to refuse banking to legal businesses, the Cramer bill would require credit unions and banks to provide written justification for why they are denying a person or business financial services. Providers who fail to comply with the law could have their status as an insured depository institution terminated.