Rep. Blaine Luetkemeyer [R-Mo.] has proposed legislation aimed at finally putting an end to Operation Choke Point by establishing a clear set of guidelines under which a federal regulator can order a financial institution to close the accounts of a client.
Rep. Luetkemeyer has been a vocal opponent of Operation Choke Point since the initiative was launched under former president Barack Obama. Operation Choke Point sought to cut off access to financial services institutions for different types of companies, normally considered to be engaged in unsavory activities. However, banks were closing the accounts of legitimate companies, including debt collectors, as part of their round-up. The initiative was officially terminated in October 2017, but some employees at federal regulatory agencies have been accused of continuing to secretly carry out the operation’s mission.
Under Rep. Luetkemeyer’s proposed legislation, the “Financial Institution Customer Protection Act of 2019” would require financial institutions to only close accounts when a financial institution has a valid reason to request such an order or when the reason is not solely based on reputation risk.
The bill was introduced last week in the House of Representatives and has been referred to the House Financial Services Committee for consideration.
Should a regulator direct an institution to close an account or series of accounts, the regulator would be required to notify the institution in writing and provide justification for the request. As well, the depository institution would be required to notify the customer that the account has been closed and provide the specific justification for the decision.
Federal regulators would also be required to submit an annual report to Congress, detailing the number of accounts that it ordered to be closed and the legal authority under which the requests were made.
