Payment Processor Porn Pressure

Regulation makes strange bedfellows, and possibly none stranger than pornographers and payments processors who have banded together to fight federal legislation that seeks to limit the means by which suspect industries access and use money.

A processors’ trade group has filed an official complaint against the FDIC in court last week alleging that the government was using improper and coercive tactics to pressure banks to end their relationship with business that processes payments for pornographers.

The examiners’ push happened shortly after the FDIC’s release in 2011 of a list of suspect industries as part of Operation Choke Point, a federal initiative that represent a joint effort between the FBI, CFPB and FDIC to crack down on industries that have a questionable track record when it comes to the legality of their finances. The list of suspect industries include pornography, ammunition sales, payday lending, purveyors of racist materials, dating services, Ponzi schemes and coin dealers.

“FDIC examiners’ targeted enforcement against the pornography industry was the advent of its improper practice of moralistic regulation over the banking industry,” the filing argues, reports American Banker.  “Regulators did not target the pornography industry because there was evidence of fraud relative to that industry.”

The FDIC withdrew the list of so-called high-risk industries in July, saying that it had been misinterpreted to mean that the categories of merchants listed were prohibited or discouraged.