American consumers are facing a new threat to the availability, diversity and affordability of goods. Its name is Operation Choke Point and it works just like it sounds. Operation Choke Point is a program run by the federal government that, without written regulation or legislation, encourages banks to discriminate against what the government considers unsavory businesses by creating burdensome reporting requirements to prove that these businesses are in compliance with local, state and federal regulations. The operation has succeeded in pushing banks and credit unions across the United States to terminate their business relationships with gun and ammunition dealers, precious metal and coin shops, and more.
{mosads}The industries targeted by the government in Operation Choke Point may not seem important to the reader. Some may be unsympathetic to the average consumer, such as purveyors of racist materials, pornography and drug paraphernalia. Finally, there are a number of businesses such as coin dealers, dating services, ammunition sellers, payday lenders and many more that sell products that are popular with consumers though possibly unpopular with the current administration.
Last month, the director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, was called before the Oversight and Investigations Subcommittee of the House Financial Services Committee. The subcommittee’s chairman, Rep. Sean Duffy (R-Wis.), questioned the director on the implications of Operation Choke Point. Duffy addressed the federal government’s use of Operation Choke Point and, very usefully, separated the policy objectives from the process by which those policy objectives were obtained.
The impact of the policy of Operation Choke Point on the American consumer is to limit consumer choice through the operation’s stated goal of degrading the ability for legal businesses to maintain banking relationships. In the past year, numerous owners of gun stores have come forward with stories of their banks telling them that they no longer are able to accommodate businesses in their specific industry. Clearly, this reduces affordability to consumers by imposing additional legal and compliance costs on legitimate businesses.
As the consumer looks forward to making purchasing decisions, she must ask herself whether there is any possibility that the goods she is interested in purchasing may be targeted by the government in the future as undesirable. If she concludes that there is a chance of such discrimination happening, she would be wise to stock up on those goods before it becomes more expensive or impossible to do so. These are not calculations that consumers should be making. It’s the government’s role to protect the ability for legal businesses to serve their customers, not pick and choose winning and losing industries with a secretive bureaucratic process.
It is the process behind Operation Choke Point, however, that is most detrimental to the American consumer. The process of using unelected bureaucrats in the Federal Deposit Insurance Corporation (FDIC), Department of Justice (DOJ) and possibly CFPB to implement policy through administrative programs creates a government that is less accountable to its citizens and less transparent to the public by violating the fundamental principles of rule of law and due process.
Additionally, it creates an environment where consumers can no longer assume that legal products will continue to be available in the future.
On the process of Operation Choke Point, Duffy asked whether Cordray believed that those at the FDIC and DOJ who, without due process, worked to terminate the banking abilities of legal businesses should retain their jobs. On this point, the director backtracked and said that he wasn’t sure that this is what happened with Operation Choke Point.
One question we would have for Cordray: If Operation Choke Point was not an example of members of the FDIC and DOJ using their power to discriminate against legal industries against which they bore personal grudges, what was it? It’s a question that the American consumer deserves to have answered.
Rep. Duffy is wholly correct in believing that we need not be sympathetic to the industries discriminated against by Operation Choke Point in order to be concerned with the process of discrimination in itself. It’s an important point to continue to make. One must not embrace the content of all speech in order to logically support the protection of free speech in a free country, just as one must not support all legal industries in order to support the protection of legal industries, the protection afforded by due process under the law.
Colangelo is the executive director of Consumers’ Research. Consumers’ Research was founded in 1929 as a product-testing and consumer advocacy organization and publishes a bimonthly magazine on consumer topics.