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US House passes bill against DOJ fraud initiative

[JURIST] The US House of Representatives [official website] on Thursday passed a bill that would end a Department of Justice (DOJ) [official website] initiative aimed at removing certain industries from the banking system. The Financial Institution Customer Protection Act of 2015 [materials] would end the DOJ's initiative called "Operation Choke Point" [Washington Post op-ed]. The bill aims to bar federal banking agencies from pressuring other banking institutions to terminate customer relationships unless there is a "material reason" to terminate the relationship and the reason is based on factors other than "reputation risk." In order to have material reason, an agency must have a belief that a specific customer or group of customers poses a threat to national security. The bill received [official count] 240 out of 250 "yeas" from Republican lawmakers and only ten Democrats. Earlier this week the Office of Management and Budget announced [Bloomberg BNA report] that they would recommend a veto if the bill is presented to President Barack Obama.

Operation Choke Point received attention from both sides of the aisle. On January 2014, Rep. Darrell Issa, R-California, wrote to then Attorney General Eric Holder requesting his oversight on the initiative and suggested it was being used to "inappropriately target" [text, PDF] third-party payment processing and online lending. On March 2014 PNC and other banks were served with subpoenas seeking information regarding whether and to what extent [TRIB Live report] they had facilitated fraud by third parties against consumers. On March 2013, the then executive director of the Financial Fraud Enforcement Task Force (FFETF) stated that the DOJ planned to take action against banks that maintained [American Banker backgrounder] relationships with payment processors that could be conducting fraudulent activity.

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