August 07, 2014 Articles

Operation Choke Point Casts Cloud over Payment Systems Industry

FTC enforcement actions against payment card processors due to deceptive acts of their merchants are on the rise. Following industry guidelines on underwriting and monitoring of merchant risk could help mitigate exposure

by Edward A. Marshall

In an initiative ominously dubbed "Operation Choke Point," the Department of Justice (DOJ), in collaboration with the Federal Trade Commission (FTC) and other federal authorities, has increasingly targeted players within the payment systems industry for the allegedly deceptive trade practices of their merchants.

The reach of the "operation" is sweeping. Indeed, recently released documents reveal that the government has initiated criminal investigations, issued subpoenas, and pursued civil litigation against scores of banks, processors, and independent sales organizations (ISOs), obtaining settlements in some. According to an internal DOJ memorandum, this is just the beginning. These early settlements are designed to send a message to the banking and payment systems community at large.

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