Operation Choke Point is a coordinated effort by the Department of Justice (DOJ) in conjunction with the Federal Trade Commission (FTC) and the Federal Deposit Insurance Corporation (FDIC) to hold financial institutions and their payment processor partners responsible for allegedly illegal acts committed by merchants and other third-party payees.

While fully supporting government investigations of activities that knowingly facilitate consumer fraud or other unlawful activities within the payments sector, Operation Choke Point has been an issue of growing concern. This initiative may have started as a legitimate government program to combat illegal and unfair practices regarding payday loans, but like many government initiatives, Operation Choke Point has succumbed to mission creep. The initial focus on illegal activities soon expanded to cover “high risk” activities and ultimately activities that some deemed politically unfavorable or unsavory. That in turn has led to denial of access to businesses and financial services providers who operate lawfully. As a result, Operation Choke Point has come under fire from members of Congress, financial institutions, and merchants.

Reducing access to payment processes simply because of assumptions of high-risk activity or political unpopularity is a slippery slope that can have serious detrimental effects on the economy. Mandates on the payments system imposed as a result of Operation Choke Point will trickle down to businesses (and ultimately, consumers) in the form of higher transaction prices, reduced services and fewer payment options.

Financial institutions and payment processors are committed to protecting consumers and the payments system from merchants engaged in illegal business practices and employ vigorous due diligence, risk mitigation, fraud detection and prevention and transaction monitoring standards to achieve this. Payments system participants are screened by acquirer financial institutions and third-party payment processors, as required by bank regulatory guidance and the rules of the payments networks. These risked-based procedures are designed to determine and appropriately size the risks an individual company may pose to the payments system. Some participants never make it past this initial screen.

That said, the payments system was designed to safely and efficiently process payment transaction data and facilitate commerce. It was not intended to also function as the arbiter of what businesses are (or are not) perceived to be facilitating “public good.”  It is the role of neither the government nor the payments system to determine that a legal activity is unsavory. Any such determinations are not only suspect, but subject to the next election cycle.

Given the robust regulatory regime that already governs the electronic payments industry, federal policymakers and regulatory and enforcement agencies should realign their efforts to address illegal business practices using existing enforcement tools. The payments industry will continue to strongly support federal law enforcement efforts to identify and catch bad actors that willingly commit fraud and scam American consumers.

Kurt Helwig is president and CEO of the Electronic Funds Transfer Association (EFTA), a non-profit professional association dedicated to the advancement of electronic payments and electronic commerce. More information can be found at www.efta.org.