House Report Shows Feds Targeting Gun Sellers And Payday Lenders

Chuck Ross Investigative Reporter
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The Federal Deposit Insurance Corporation hired a private banking compliance contractor which characterized arms and ammunition dealers as high risk because “of being associated with terrorism and terrorist acts,” according to a report released Monday by the House Oversight and Government Reform Committee.

The report also provided email correspondence from FDIC officials expressing their deep disdain for the payday lending industry.

Oversight’s report is the latest in its investigation of Operation Choke Point, an initiative started by the Department of Justice in partnership with FDIC.

Despite the loftiness of its stated goal of protecting consumers from fraud, Operation Choke Point has been criticized by several industries, including gun dealers and payday lenders, for unfairly cutting them out of the banking system.

A number of legitimate and long-standing businesses in both industries have come forward claiming banks cut off banking relationships out of the clear blue.

The freeze-out occurs because the industries are designated as “high-risk.” By doing business with companies in those industries, banks invite possible extra scrutiny from federal regulators.

“The inclusion of firearm merchants on the high-risk list did not just impact the behavior of FDIC supervisory and enforcement staff,” reads the Oversight report.

It noted that private companies which provide compliance services and software also characterize arms and ammunition dealers as “high-risk,” indicating the perception of gun makers as risky ventures pervades the system.

“At least two companies, AML Services International and MSB Compliance, directly incorporated the FDIC list into its designation of high-risk merchant and originator categories,” the report continues, drawing attention to a training package offered by FIS Global Services entitled “Types of Higher Risk Individuals and Non-Individuals.”

“Arms and Ammunition Dealers are identified as higher risk businesses because they have a higher risk of being associated with terrorism and terrorist acts,” FIS’s entry reads.

Oversight hit back at that in its report.

“Such spurious claims are an inherent product of the list’s opacity,” the report reads. “FDIC did not justify or explain why it believes relationships with firearms and ammunition merchants present a “high risk” to supervised financial institutions.”

Oversight also provided email exchanges showing FDIC officials expressing a particular disdain for the payday lending industry.

In a Nov. 26, 2012 e-mail, Thomas Dujenski, FDIC’s Atlanta Regional Director, expressed his deep disdain for payday lending.

“I have never said this to you (but I am sincerely passionate about this)…but I literally can not stand pay day lending,” Dujenski wrote to another FDIC official.

“They are abusive, fundamentally wrong, hurt people, and do not deserve to be in any way associated with banking.”

Some believe that payday lending essentially rips off poor people because it gives loans with high interest rates. Others say it provides a necessary service that mainstream banks won’t provide, and high rates are necessary for the business model to work.

“Notwithstanding the emotional intensity of their beliefs, it is entirely unacceptable for senior FDIC officials to inject personal moral judgments into the bank examination process,” reads the Oversight report.

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