Obama Admin Uses New Tactics to Shut Down Payday Lenders: Are Guns Next?

The Obama administration continues to target payday lenders, an industry previously in the crosshairs of Operation Choke Point. Operation Choke Point was a 2013 project that put the squeeze on financial institutions with ties to certain industries deemed “unsavory” by the Obama administration — industries that included not only payday lenders but the firearms industry.


Now the administration is using a new tactic to suffocate businesses on the periphery of these “unsavory” industries in order to cut off vital services these businesses require to operate. Their new tactic: the RICO lawsuit.

The Department of Justice has used the mob-inspired Racketeer Influenced Corrupt Organization Act, known as RICO, to go after payday lenders in at least three different cases. Those cases involved Native American tribes providing online loans to people in a number of states at rates that exceed limits imposed by those states. Since the tribes enjoy immunity from federal prosecution for violating the interest rate limits imposed by states, the agency went after their partners and lawyers for conspiring with the tribes to break the limits.

“The government’s decision to extend RICO’s ‘collection of an unlawful debt’ language to online payday lenders is a significant moment in federal law enforcement,” American Banker said of the move. “If this new theory of law enforcement survives legal challenges, look for the government to continue using it in the online payday lending industry and potentially beyond.”


Is the use of the RICO Act yet another example of this administration’s overreach? One attorney says yes.

“The government was badly burned by Operation Choke Point, which precipitated not only a lawsuit but also incredibly bad publicity and hearings and proposed legislation on the Hill. Despite those results, the government has been unrelenting in its efforts to suppress payday lending,” Hilary Miller, an attorney who represents a number of payday lenders, said. “What’s unique in the recent prosecutions is that Congress never intended that RICO would be used for ordinary business transactions without an organized crime nexus.”

There’s plenty of reason to worry the firearms industry is next on the Obama administration’s agenda.

Republican strategist Liz Mair said those in the gun industry “know they—and other types that aren’t exactly well-loved in liberal activist circles—were wrapped up with one of the industries that’s now again being targeted, and that combined with the potential for the term ‘enterprise’ to be interpreted very loosely is and probably should be a concern to folks in the gun and firearms sector, but also to others previously targeted.”


Miller also agrees these tactics could be used to target the firearms industry. “Clearly the Justice Department is not beyond trying new things,” he said. “They’ve got a smart people who work there, and they spend a lot of time thinking about how they can prosecute previously unreachable conduct to which they object.”

Stay vigilant. Although the Obama administration is coming to an end, they haven’t given up on leaving their mark on America.


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