WASHINGTON — A group of payday lenders is suing bank regulators over their alleged involvement in Operation Choke Point, a federal investigation to limit use of the banking system for fraudulent activity.

Critics charge that the Department of Justice crackdown has forced banks to sever relationships with legitimate businesses involved in payday lending and other sectors through the banking regulators, including the Federal Reserve Board, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. The lawsuit seeks to end the initiative, which is now more than a year old.

"Despite this vigorous effort to inform regulators of the harmful effect of Operation Choke Point, this abuse of regulatory authority continues, and many legal businesses, including nonbank lenders who are members of CFSA, are losing their basic banking services, such as bank accounts and lines of credit," Dennis Shaul, chief executive of the Community Financial Services Association of America, a trade group for payday and short-term credit lenders, and a lead plaintiff in the case, said in a press release.

Advance America, a payday lender and CFSA's largest member, is also named as a plaintiff.

The complaint does not include the Justice Department, but instead focuses solely on the bank regulators. It alleges that regulators "are engaged in a concerted campaign to drive" payday lenders "out of business by exerting back-room pressure on banks and other regulated financial institutions to terminate their relationships with payday lenders."

Bryan Hubbard, a spokesman for the OCC, said the agency does not comment on litigation, though he added that it is "not part of" Operation Choke Point.

"The OCC routinely cooperates with law enforcement agencies regarding their investigations and requests for information," he said.

Representatives from the Fed and the FDIC did not respond immediately to a request for comment.

The lawsuit was filed on Thursday in the U.S. District Court for the District of Columbia.

 

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