We had an epiphany the other day, and it’s favorable news for high risk merchants.
We wondered when was the last time we wrote about Operation Choke Point, the U.S. Department of Justice’s 2013 effort to deny electronic payment resources to certain high risk industries such as payday lending, guns and ammunition sales and telemarketing, among others.
We used to blog about it quite a bit – it was a simmering issue, in the news every week and discussed ad nauseum at the tradeshows which we attended. It had been months since we heard much about it, until we came across a couple of news items last week.
Is Operation Choke Point defunct?
It certainly appears to be.
A recent article in Digital Transactions, quotes Assistant Attorney General Stephen Boyd’s letter to U.S. Rep. Bob Goodlatte, the Chairman of the House Judiciary Committee, calling Operation Choke Point ‘a misguided initiative’; and that ‘All of the Department’s bank investigations conducted as part of Operation Choke Point are now over, the initiative is no longer in effect, and it will not be undertaken again.’
In a follow-up article a week later, Digital Transactions reported on a federal judge who threw out a Consumer Finance Protection Bureau lawsuit against four payment processors who offered their services to several debt collection agencies. The Bureau alleged that the collection agencies used robo-calls to collect millions of dollars in phantom debts.
Do the above examples mean that Operation Choke Point, as we have known it, is coming to an end? If nothing else, the movement has lost significant momentum.
The problem we have with Operation Choke Point
Remember the helicopter scene in Die Hard, when Special Agent Johnson and Johnson are discussing the ‘breakage’ – the number of hostages that may perish while they take out the terrorists?
‘What do you figure on breakage?’
‘I figure we take out all the terrorists, and lose 20 percent of the hostages…25, tops.’
‘I can live with that.’
The CFPB and Operation Choke Point took a similar ‘guilt by association’ approach: In its effort to ‘clean up’ certain high risk industries, legitimate businesses would be sacrificed in addition to those committing fraud.
We applaud the Bureau’s efforts to weed out the bad actors in high risk industries. There are many of them. The Bureau, in our opinion, however, has overstepped its bounds by denying legitimate high risk merchants the payment processing necessities they need to survive.
What will be the effect on high risk merchants?
Is it cause for high risk merchants to celebrate? We don’t want to be the kill-joy, but celebrations would be premature.
It’s not as if banks are going to instantly change their policies about offering payment processing solutions for the high risk industries – payday lending, guns and ammunition and telemarketing – that Operation Choke Point was created to suppress.
If banks begin to welcome those industries, it will be a gradual (slow) process. With certain high risk industries – online pharmaceuticals, CBD and tech support come to mind – banks can be unpredictable, sometimes ceasing to offer processing for the slightest of reasons or no reason.
Our pledge: We will do our best to find a solution
At Instabill, we receive inquiries all day, every day about finding payment processing for high risk merchants for a variety of industries. We’ve partnered with many acquiring banks – domestic and international – enabling us to take on businesses of all risk levels.
All we ask is for a 10-minute conversation about your business, and we’ll be able to decide which payment solutions will work best for you. Out merchant account managers are available Monday through Friday from 8 a.m. until 6 p.m. U.S. eastern time.