July 18, 2014

Daily Funder interviews Allyson Baker on Operation Choke Point

2 min

Venable partner Allyson Baker was interviewed in the July/August 2014 issue of Daily Funder about the Department of Justice’s Operation Choke Point. The program’s goal is to root out fraud and illegal transactions in the consumer lending industry. According to the Justice Department, it is directly targeting fraudulent players in the financial services industry but also going after financial service companies such as banks and payment processing firms helping those allegedly fraudulent companies operate.

“Choke Point is part of the Department of Justice’s Financial Fraud Enforcement Task Force,” Baker said describing the program. One of the more interesting aspects of Operation Choke Point, according to Baker, is the mechanism federal officials use to target merchants. “This is a law enforcement action, not regulatory,” she said. “They are doing this through the threat of court action.”

Despite criticism over Operation Choke Point, Baker said lenders focusing on business-to-business transactions likely have less to fear than consumer-based industries. “Right now they seem specifically interested in consumer finance and products aimed at consumers,” she explained. Baker added that federal regulation of business lenders is likely to fall under the Federal Trade Commission’s jurisdiction. One of the key triggers on a Choke Point investigation, according to Baker, is a high chargeback rate on transactions which non-consumer lenders likely do not deal with on a regular basis.