US: TPPPA supports lawsuit against Operation Choke Point

The need to address the selective enforcement of regulators own sensible guidance on banks managing third-party risks led the TPPPA to support the lawsuits efforts to uphold a payments system supportive and inclusive of all lawful merchant groups.

Marsha Jones, TPPPA President, has claimed that although TPPPA approves regulators’ fraud mitigation guidance in the payments system in what concerns the banking industry, it cannot support being used to choke out legitimate, politically-unfavorable, businesses from the economy.

In 2011, the Federal Deposit Insurance Corporation (FDIC) published a list of example merchant categories, which included both legal businesses and illicit activities, it deemed high risk. The list included, without explanation or distinction, payday loans, credit card schemes, coin dealers, debt consolidation scams, dating services, Ponzi schemes or firearm sales.

Jones has also argued that the end results of the FDICs grouping of Ponzi schemes and debt consolidation scams together with legal businesses have resulted in virtually whole merchant categories being denied entry and continued operation in US economy.

Although the FDIC removed this published list of high-risk categories in July 2014, the impact remains. Financial institutions, dubious of the retraction after this list was held up as the centerpiece of FDIC guidance for more than three years, are reluctant to maintain relationships with processors whose merchants are included on the newly-retired list, or out of concern that another, non-public list may still exist.

In support of its membership, and in an effort to restore order and consistency within the financial services industry, the TPPPA has stepped in to add clarity and consistency via best practices with its Compliance Management System (CMS). The CMS provides a holistic view of compliance, addressing gaps between banks and processors while incorporating regulatory guidance related to third party processing.

The Third Party Payment Processors Association (TPPPA) is a national not-for-profit industry association representing and promoting the interests of the payment processors, their financial institutions and their merchants. TPPPA advocates on behalf of its members to the industry and government, educates its members on the latest rules and regulatory updates, and provides comprehensive tools to support operational excellence and integrity in payments.