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We were shocked last year to learn of a federal program "Operation Choke Point" which has been used to go after perfectly legal businesses that the Obama administration does not like, such as the gun and tobacco industries. Now, we are heartened to hear that the targeted businesses are starting to fight back.Operation Choke Point is an effort coordinated by the Federal Deposit Insurance Corp., the Justice Department and, perhaps, the Consumer Financial Protection Bureau, to designate certain industries as "high risk," and then pressure banks and payment processing companies to sever their ties to the targeted businesses, thereby choking off their means of operation.
The ostensible purpose was to go after fraudsters and illegal businesses, like debt consolidation scams and Ponzi schemes, but numerous legitimate businesses in politically disfavored industries, such as guns and ammunition dealers, tobacco dealers, coin dealers and payday lenders, have also found themselves in Operation Choke Point's crosshairs.
One such victim is Brennan Appel, owner of Global Hookah Distributors (SouthSmoke.com), a tobacco parts distributor based in Charlotte, N.C. After a 12-year relationship with his bank, Mr. Appel suddenly received a notice last year that all of his Bank of America accounts "business and personal" would be shut down, without explanation, and he had a mere two weeks to scramble to notify all his customers, shift his payroll and make other arrangements. Then in February, Mr. Appel's payment processor, EFT Network, likewise told him it could no longer do business with him due to the "risk" involved in the business.
After much research, Mr. Appel discovered Operation Choke Point and related his story to the U.S. Consumer Coalition, an organization dedicated to protecting consumer choice and fighting government intrusions into those voluntary decisions.
A recorded conversation between Mr. Appel and the president of EFT Network, Alex Bacon, was quite revealing. "Have you heard of a little thing called Choke Point and the CFPB?" Mr. Bacon asked. "They're taking aim at industries like you and others to eliminate you from business by choking off your payment processing." (The USCC website has audio clips of the conversation.)
"Just because you don't like something doesn't mean it's right to just close it," Mr. Appel told us.
There is a hard lesson here. "Government's just abusive. You learn that in business over the years," Mr. Appel said. "I hope that standing up to this will put a stop to it. Somebody's got to stand up."