WASHINGTON – Yesterday the Federal Deposit Insurance Corporation (FDIC) effectively retracted a portion of its previous guidance document related to a Department of Justice (DOJ) program known as “Operation Choke Point.”

This program was ostensibly aimed at getting covered banking institutions to apply increased scrutiny to some of what it calls third-party payment processors. The original FDIC guidance document included a substantial list of merchant types it offered as examples of the kinds of businesses it felt banks should be doing extra scrutiny on before lending, including a vague reference to tobacco retailers.

Recently, Operation Choke Point has come under fire from members of Congress and merchants, as a Congressional investigation found that it was aimed primarily at the pay day lending industry and was in fact being used to apply pressure to industries that, while being perfectly legal, were deemed unsavory by the DOJ. 

IN the face of this renewed pressure from Congress and merchants, including NACS, the FDIC has reissued its guidance, removing the controversial list of examples. In its announcement of the change this week, the FDIC sought to clarify that the list of examples provided — which included tobacco retailers — was not meant to be a list of merchant types that were discouraged or disallowed by FDIC. 

“Responsible retailers should not be subjected to undue scrutiny for no valid reason,” said Jon Taets, NACS director of government relations. “After identifying the reference to tobacco retailers as potentially problematic to our members and raising that concern with appropriate officials, we are encouraged to see this step in the right direction by the FDIC.”

While NACS views this clarifying action as a move in the right direction, questions still remain about the overall Operation Choke Point program and what it includes in its definition of a tobacco retailer. NACS staff continues to work with DOJ to get further clarification on that point.

For additional background on this issue, read the “Inside Washington” article in this month’s issue of NACS Magazine.