Joint Trades Testimony, House Financial Services Committee, re: “Operation Choke Point”

Chairman Hensarling, Ranking Member Waters and Members of the Committee, CBA, CUNA, EFTA, ETA, ICBA, NAFCU, and TPPPA appreciates the opportunity to submit this statement for the record for the Committee’s hearing, “Who’s In Your Wallet: Examining How Washington Red Tape Impairs Economic Freedom.”

We write to express our concerns with the Financial Fraud Taskforce’s initiative “Operation Choke Point.” We fully support the federal government’s role in fighting fraud and ensuring the integrity of markets, but we are concerned that Operation Choke Point’s broad and overly aggressive enforcement tactics undermine its effectiveness and create serious risks to consumers and the economy. First, Operation Choke Point is imposing ill-considered and costly mandates on payment systems, which will ultimately result in higher prices and reduced services for consumers. Second, Operation Choke Point threatens to close access to the financial system to law-abiding businesses, because the mere prospect of an enforcement action is sufficient to cause financial institutions to restrict access to their payment systems to only established companies that present low risks. While preventing fraud is a top concern, it needs to be balanced with ensuring that businesses and consumers that operate in accordance with applicable laws can still access payment systems. Finally, the disruption of commerce caused by Operation Choke Point could have adverse economic consequences, especially for the growth of ecommerce. Online businesses are more likely to have business models that Operation Choke Point would view as risky (even though they are lawful businesses). As a result, they are more likely to be restricted from accessing payment systems out of an overabundance of caution, even if they have adequate and balanced controls to mitigate this higher risk. Accordingly, Operation Choke Points, if left unchecked, could seriously deter the natural growth and development of ecommerce and stifle future economic growth.

We believe that a better approach is to permit the payments industry to carry-out its ongoing efforts to strengthen practices and technologies aimed at protecting consumers from unscrupulous businesses. We support industry efforts to strengthen internal controls or processes for institutions that provide payment processing services for customers engaged in higher-risk activities. These should include risk assessments, due diligence to determine if customers are operating in accordance with applicable law, and ongoing systems monitoring . Regulators and law enforcement should not prohibit or discourage these institutions, regardless of their size, from serving these customers provided adequate and balanced controls are in place.


To read the full Comment Letter, please download the PDF.