Payment Processors Trade Group Questions Operation Choke Point

October 9, 2014         By: Melanie Macinas

The Third Party Payment Processors Association (TPPPA), an organization representing businesses that expedite monetary transactions between consumers, has recently filed a legal brief supporting a lawsuit against Operation Choke Point, which investigates banks and their transactions with payment processors, payday lenders, and other businesses said to be at higher risk for money laundering, fraud and terrorist financing.

An ongoing effort of the US Department of Justice, Operation Choke Point makes use of federal banking regulators to pressure banks to close the accounts of several companies.

Filed by payday industry representatives in June, the lawsuit accuses three of the US major financial regulatory bodies—the Federal Reserve Bank, the Federal Deposit Insurance Corporation and the Office of the Comptroller of Currency—of abusing their authority.

“They’re using regulation-examining authorities to coerce banks into dropping relationships that are politically unfavorable,” said Marsha Jones, head of the trade association, whose mission is to help banks and processors operate efficiently within the government’s regulatory environment.

In an interview with The Daily Signal, Jones said their group spoke out to stop the Justice Department from making the public believe that it targets only seedy enterprises including Ponzi schemes and pornography.

“This isn’t about [only] payday lending, this is about going after third-party payment processors because it’s faster and less costly and easier than going after the bad merchants directly.”

It will take time before the case gets a verdict, but the effects of such initiative will be felt immediately, as it takes a toll on the payments sector as well as on consumers.