House Oversight Committee Threatens Crucial Anti-Fraud Program

Written by Dan Fair on June 6, 2014 - 9:43am

The House of Representatives’ Oversight Committee last week called for an end to a critical Department of Justice (DOJ) anti-fraud investigation called “Operation Choke Point.” Eliminating the operation could hamper DOJ’s ability to prevent the financial abuse of some of the most financially vulnerable consumers.

Operation Choke Point is an essential tool for preventing fraudulent activity such as illegal payday loans, senior scams, identity theft, and other forms of fraud. The program currently includes at least 15 separate investigations into banks and payment processors that may knowingly be processing illegal and fraudulent transactions.

Banks and payment processors have a responsibility to consumers to know who is requesting a transaction and to monitor suspicious activity. When banks and payment processors knowingly look the other way in order to make more money on fees, they violate federal law and are just as guilty of fraud as the original perpetrator.  

Operation Choke Point investigations have already had a significant impact. A Reuters story quoted Maame Ewusi-Mensah Frimpong, an official in the DOJ’s civil division as saying "We believe we already have denied fraudulent merchants access to tens, if not hundreds, of millions of dollars from consumers' bank accounts, and that amount will increase daily and indefinitely."

One of the institutions involved is Four Oaks Bank, a third-party payment processor in North Carolina that recently settled a lawsuit with DOJ borne out of Operation Choke Point. Despite receiving hundreds of notices from consumers’ banks that individuals being charged had not authorized transactions, Four Oaks continued authorizing $2.4 billion worth of debit transactions, making more than $850,000 in fees.  Yet earlier this week, Congressman Blaine Luetkemeyer (R-MO) said he was working on legislation that would give payment processors a free pass in some situations.

Financial scammers don’t act alone. DOJ should use every legal means of pursuing financial institutions that knowingly enable fraud. The fact that the Oversight Committee and Congressman Leutkemeyer do not support these efforts is very troubling, and we call on them to support Operation Choke Point.