Published: June 2014

“Choking” banks that don’t respond to the threat of consumer fraud

Coalition: Americans for Financail Reform (AFR)

The Department of Justice (DoJ) responds to the proliferation of financial fraud by cutting off access to banks and payment processing companies that enable wrongdoers to debit victims' bank accounts and move money around. Its Operation Choke Point helps eliminate unlawful activity like senior fraud, payday loan fraud, bogus debt relief services and other mass-marketing fraud schemes that cause tens of billions of dollars of losses each year from millions of individuals and businesses. Consumer Action joins coalition advocates in urging the Senate to support the DoJ's Operation Choke Point and other efforts that protect consumers and taxpayers from fraud.

The Department of Justice's (DoJ) Operation Choke Point is an effort to stop banks and payment processors from facilitating illegal activity and is aimed at banks that “choose to process transactions even though they know the transactions are fraudulent, or willfully ignore clear evidence of fraud.” It is so named because through strangling the providers of financial services to the targeted industries, the government can “choke off” the oxygen (money) needed for these industries to continue doing business.

One recent study found that fraud drains $2.9 billion a year from the savings of senior citizens, but wrongdoers who access the payment system inflict harm on everyone. In addition to the direct victims of fraud, the general public spends millions of dollars on identity protection products and loses faith in the security of the payment system. Retailers and online merchants lose business if consumers are afraid to shop on their website or at their store (think of Target and Michael's - both companies that suffered huge data breaches not too long ago).

Banks are not always aware that they are being used to facilitate illegal activity, but if and when they choose to continue to profit from lines of business in the face of blatant signs of illegality, they become an appropriate target for enforcement action. The current focus of bank regulators is on areas where fraud or illegal activity is prevalent; telemarketing, credit repair services and debt forgiveness programs have long been problematic areas plagued with fraud and deceptive conduct.

Fighting payment fraud should not be controversial. Everyone benefits from efforts to stop illegal activity that relies on the payment system. Consumer Action joins coalition advocates in urging the Senate to support the DoJ's Operation Choke Point and other efforts that protect consumers and taxpayers from fraud.

Lead Organization

National Consumer Law Center (NCLC)

Other Organizations

Americans for Financial Reform | Arizona Community Action Association | Arkansas Against Abusive Payday Lending | California Reinvestment Coalition | Center for Economic Integrity (Arizona) | Center for Responsible Lending | Coalition of Religious Communities | Consumer Federation of America | Consumer Action | Consumers Union | Kentucky Equal Justice Center | The Leadership Conference on Civil and Human Rights | National Association of Consumer Advocates | National Consumer Law Center (on behalf of its low income clients) | National Fair Housing Alliance | National People’s Action | New Economy Project | NW Consumer Law Center | Public Citizen | Public Justice Center | South Carolina Appleseed | Legal Justice Center | Texas Appleseed | U.S. PIRG | Virginia Citizens Consumer Council | Virginia Partnership to Encourage Responsible Lending | Virginia Poverty Law Center | Woodstock Institute

More Information

To read the full coalition letter, please click here.

For more information on payment fraud, please visit AFR's website.

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