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Court denies CFPB's motion to dismiss Operation Choke Point-related complaint

The U.S. District Court of the Northern District of California on Dec. 13 denied the Consumer Financial Protection Bureau's motion to dismiss a counterclaim filed against the agency in relation to Operation Choke Point, a controversial initiative of the U.S. Department of Justice meant to block access to payment systems by targeted businesses and close them without a court order.

In May 2015, CFPB filed a lawsuit against Daniel Lipsky and his companies, Xenia, Ohio-based Nationwide Biweekly Administration Inc. and Loan Payment Administration LLC, for allegedly luring consumers with false promises of mortgage savings.

Nationwide Biweekly sought injunctive relief from the court asking that CFPB's actions be enjoined permanently. In its counterclaim, Nationwide Biweekly alleged that CFPB filed the lawsuit without notifying the company of any violations and that the lawsuit lacked substance and were based on accounting errors.

Furthermore, it accused CFPB, as one of the proponents of Operation Choke Point, of illegally campaigning to drive third-party payment processors out of business by pressuring banks to end their transactions with such businesses, which caused suspension of services for 135,000 of the company's clients after its bank partners, all of whom were supervised by CFPB, terminated their accounts with the company.

The court's order denying the motion to dismiss noted, "Whether Nationwide will be able to present enough evidence to create a triable issue of fact and, if so, then to persuade a trier of fact that the inferences it advances should be adopted, are questions for a later day."