For the past several years, payment processors and independent sales organizations (ISOs) have seldom received good news about Operation Choke Point—the moniker used to describe the pursuit of the payments industry by agencies such as the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB), for the untoward acts of the merchants the industry serves.
The arc of enforcement actions seemed to be accelerating—a trajectory of more litigation and the pursuit of increasingly draconian remedies. Indeed, processors and ISOs went from being sources of information for government actors pursuing businesses engaged in consumer fraud to targets themselves. The FTC and the CFPB began to seek contempt sanctions against processors that allowed their contractually established reserve funds to be used to satisfy consumer chargebacks, claiming that those processor dollars were subject to freezes imposed on the target merchant's assets. Then the government began naming processors and ISOs (along with individual principals) as defendants in cases alleging unfair and deceptive practices against merchant codefendants, with the government seeking to hold them liable, not just for the revenues associated with "bad apple" merchants, but for the entirety of the consumer harm perpetrated by their merchant customers.