By Liana Molina

Recently a group of lawmakers, including Representative Darrell Isa, launched an attack against a Justice Department program known as Operation Choke Point. They portray it as a crazed government effort to make banks withhold services from a variety of law-abiding businesses. Its true purpose, some of these critics assert, is to shut down the payday lending industry.

The reality is a little more nuanced. Operation Choke Point grew out of an inter-agency consumer protection group and their concerns about a new generation of fraudsters who profit by using their access to people’s bank accounts to make illegal withdrawals – again and again and again. The real targets of this program are a subset of banks and payment companies who enable this fraud when, in the Department’s words, they “knowingly facilitate consumer scams, or that willfully look the other way in processing fraudulent transactions.”

Mass-market fraud, directed at businesses as well as individuals, causes tens of billions of dollars in losses every year. A large share of that ill-gotten money comes out of the pockets of senior citizens and financially desperate people.

There is collateral damage as well. When fraud is widespread, consumers may take on additional expenses for services like identity protection products.  Others may steer clear of companies whose problems have made headlines. When personal credit card data was stolen from millions of Target customers in December 2013, the episode not only reminded consumers of ongoing threats to the financial system, but also proved costly for Target itself.

Banks do not always recognize that they are being used to facilitate illegal activity, but the law requires them to exercise reasonable due diligence. Operation Choke Point is aimed at institutions that suspect fraudulent activities, but fail to act.

In a 12 page report issued on May 29, 2014, the House Committee on Oversight and Government Reform, led by Representative Issa, asserted that Operation Choke Point had, among other things, “forced banks to terminate relationships with a wide variety of entirely lawful and legitimate merchants.”

Myths such as these have been repeated so often that in a recent letter to lawmakers, Assistant Attorney General Peter Kadzik felt obliged to go into considerable detail about what the department has and has not done in its enforcement actions against banks and payment processors, and why.

In fact, there is no evidence that the DOJ has pressured banks to close the accounts of legal businesses. To date, the Department has brought only one action as part of Operation Choke Point. That action involved Four Oaks, a North Carolina bank, along with a third-party payment processor that, according to federal prosecutors, enabled payments for an illegal Ponzi scheme, a money laundering operation for illegal internet gambling, a prepaid card marketing scam, and illegal payday loans.

Despite numerous red flags, Four Oaks allowed the payment processor to initiate $2.4 billion in transactions against consumers’ bank accounts, and the bank got more than $850,000 in fees in exchange. Four Oaks had to pay $1 million in civil penalty funds and $200,000 to the Postal Inspection Service’s Consumer Fraud Fund, in addition to being required to comply with measures that will keep it from processing fraudulent activities in the future.

The actions outlined in the Four Oaks case are absolutely the kinds of activities that should be investigated by the Department of Justice, and other relevant regulators. Congress should be looking for ways to support law enforcement to protect the integrity of our banking system instead of providing cover to banks and payment processors that aid and abet fraud against consumers.

Liana Molina is the Payday Campaign Organizer with the California Reinvestment Coalition, a coalition of over 300 nonprofits throughout California that advocate for fair and equal access to banking and other financial services for California’s low-income communities and communities of color.