EFF recently received dozens of pages of documents in response to a FOIA request we submitted about Operation Choke Point, a Department of Justice project to pressure banks and financial institutions into cutting off service to certain businesses. Unfortunately, the response from the Department of Justice leaves many questions unanswered.
EFF has been tracking instances of financial censorship for years to identify how online speech is indirectly silenced or intimidated by shuttering bank accounts, donation platforms, and other financial institutions. The Wall Street Journal wrote about the Justice Department’s controversial and secretive campaign against financial institutions in 2013, and one Justice Department official quoted in the article stated:
"We are changing the structures within the financial system that allow all kinds of fraudulent merchants to operate," with the intent of "choking them off from the very air they need to survive."
While Operation Choke Point was purportedly aimed at shutting down fraudulent online payday loan companies, we became concerned that this campaign could also affect legal online businesses.
EFF filed FOIA requests with the Department of Justice (DOJ), the Consumer Financial Protection Bureau, and the Federal Trade Commission. The documents EFF received from the DOJ are primarily correspondence between members of Congress and the Department of Justice. In that correspondence, Congress members raised concerns about Operation Choke Point, asked questions about how it operates, and stated that this is an issue that constituents are sending letters about.
Sen. Harry Reid (D-NV) and Rep. Kenny Marchant (D-TX), for example, emailed the Department of Justice with specific questions about how the Department defines a “high risk” financial business.
In the correspondence we received, the DOJ overwhelmingly replied with form letters that didn’t describe the criteria the Department used to decide whether a company was considered high risk, how many companies were currently labeled ‘high risk,’ whether a company would ever know if it was considered ‘high risk,’ or any appeal process for companies to have themselves removed from that category.
Rep. Sean Duffy (R-WI) wrote a letter to then Attorney General Eric Holder describing how two community banks in Wisconsin were bullied by regional agents of the FDIC, who told them to stop working with prominent online lenders:
These banks were informed that if they chose to ignore the FDIC's request, they would face "the highest levels of scrutiny they could imagine," and were given no explanation, details of complaints, or any evidence as to why these demands were being made.'
Duffy called these threats "outrageous" and "intimidation tactics."
Other members of Congress wrote to the Department of Justice about how Operation Choke Point was hampering opportunities for law-abiding Native American tribes and the Hispanic community.
Rep. Brad Sherman (D-CA), who cosponsored the Dodd-Frank Wall Street Reform and Consumer Protection Act and advocates for additional financial regulation, expressed deep concern about the Department of Justice stepping beyond the bounds of the law with Operation Choke Point. In his letter to Holder, he stated:
As much as I would like to see stronger regulation of consumer lenders, I've sworn to uphold the U.S. Constitution. Accordingly, I must oppose efforts to "legislate by prosecution" and legislate by "criminal investigation," even if I agree partly or completely with the ultimate substantive aim.
He also said, "[y]our department should conduct criminal investigations for the purpose of enforcing laws we have—not laws you (and I) might wish we had."
Unfortunately, the responses from the Department of Justice left more questions than answers. Vital details about Operation Choke Point—including what industries beyond online loans may be impacted, the exact criteria for labeling a business ‘high risk,’ and the tactics used to pressure banks into participation—are still unknown.
Many people believe that America’s financial institutions may need additional regulation, and some may believe that online lenders should face additional scrutiny. However, an intimidation squadron secretly pressuring banks to cut off businesses without due process is not the right way forward. As we’ve seen with digital booksellers, whistleblower websites, online publishers, and online personal ads, payment providers often cave to pressure—whether formal or informal—to shut down or restrict accounts of those engaged in First Amendment-protected activity. In order to foster a future where digital expression can flourish, we need to ensure that necessary service providers like banks and payment processors don’t turn into the weak link used to cut off unpopular speech.
But that requires transparency. We need more information about how the government is pressuring financial institutions. Unfortunately, the Department of Justice’s nonresponses to Congress don’t get us any closer to understanding this complicated issue.