National Payments Association Applauds Congressional Report Exposing FDIC’s Role in Operation Choke Point

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Third Party Payment Processors Association (TPPPA) applauds the House Oversight Committee’s report exposing the politically motivated overreach of the FDIC in their role in Operation Choke Point and urges Congress to take further action.

Third Party Payment Processors Association (TPPPA)

“It is clear from the Committee’s report that the FDIC stopped neutrally enforcing regulations designed to protect consumers and ensure the safety and soundness of the nation’s banks,” TPPPA President Marsha Jones said.

The Third Party Payment Processors Association (TPPPA), the not-for-profit industry association representing and promoting the interests of payment processors, their banks and merchants, released a statement today from Association President Marsha Jones, reacting to the report from the House Oversight and Government Reform Committee filed on December 8, 2014, that criticized the FDIC’s role in the Obama Administration’s misguided Operation Choke Point. The report confirms the TPPPA’s views expressed in its brief, filed amicus curiae, in support of the Community Financial Services Association of America’s (CFSA) lawsuit against federal banking regulators to end Operation.

“It is clear from the Committee’s report that the FDIC stopped neutrally enforcing regulations designed to protect consumers and ensure the safety and soundness of the nation’s banks,” TPPPA President Marsha Jones said. “Instead, high-ranking FDIC officials pursued their own personal political agenda and attempted to shut down legal businesses these officials did not like. This was wrong, hurt consumers, and damaged the financial system. When Congress attempted to get to the bottom of this, these officials did not tell the truth. Throughout this whole effort payment processors were caught in the middle.”

The report also exposes the FDIC’s “high-risk merchants” list as a sham. It was designed to influence banks to cancel accounts of legal businesses.    The high-risk merchant list was first published in the FDIC’s Supervisory Insights in an article entitled “Managing Risks in Third-Party Payment Processor Relationships” and further referenced in the FDIC Financial Institution Letter FIL-3-2012 entitled “Payment Processor Relationships Revised Guidance.” The list was also attached to Department of Justice subpoenas to banks and processors as part of Operation Choke Point.

“The FDIC targeted controversial, yet legal merchants by including these businesses on the list with illicit and inflammatory activities such as Ponzi schemes, credit card schemes, debt consolidation scams and racist materials,” Jones said.

“We expect our banking regulators to be neutral enforcers of regulation, derived from the laws passed by Congress. The stability of our banking system and the economy depends on government officials to enforce the law dispassionately and be impervious to the political climate of the day,” states Jones. “If we allow our banking regulators and law enforcement agencies to create political weapons like Operation Choke Point, we set a very dangerous precedent. Today that weapon is pointed at payday lenders and gun and ammunition dealers; tomorrow it could be pointed at family planning clinics, environmental organizations, or gay and lesbian rights organizations.”

Recognizing the irreparable harm to legal and legitimate businesses, on November 10, 2014, David Cohen, the Under Secretary for Terrorism and Financial Intelligence at the Treasury Department, in a speech at the joint conference of the American Bar Association and the American Bankers Association, warned of the dangers of “de-risking”, the practice of terminating or restricting business relationships by banks to avoid perceived regulatory risk, rather than in response to an assessment of actual risk or illicit activity. The Under Secretary characterized de-risking as “the antithesis of an appropriate risk-based approach,” warning that the practice can “undermine financial inclusion, financial transparency and financial activity with associated political, regulatory, economic and social consequences”.

“There has been irreparable harm done already, “ states Jones. “The practice of de-risking will continue until banks can feel secure in the knowledge that banking regulators will be held accountable for their inappropriate backroom strong-arm political tactics, and banks’ confidence in their regulators and law enforcement agencies is restored. The TPPPA urges Congress, the courts and the Investigators General of these agencies to take appropriate action to stop this abuse of power and restore equilibrium and integrity to the banking system.”

The TPPPA supports banking regulators when they ensure the safety and soundness of the banks and the banking system. The TPPPA embraces straightforward, prudent regulatory guidance, and has developed best practices in third party payment processing with its Compliance Management System (CMS) to further compliance in the banking system. The CMS provides a holistic view of compliance, addressing gaps between banks and processors while incorporating regulatory guidance related to third party processing.

About TPPPA
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. To learn more about the TPPPA, visit the website, http://www.tpppa.org.

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Marsha Jones
@mjonesTPPPA
since: 03/2014
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