The Federal Deposit Insurance Corp (FDIC) has withdrawn a list of merchant types that it had formerly labeled “high risk.” The list included merchants like debt collectors, payday lenders, adult entertainment and others the FDIC felt needed heightened scrutiny. The list was developed as a way to monitor certain types of merchants from taking advantage of the FDIC system. But legislators and business owners claim that placing specific businesses on the list has deprived legitimate merchants of payment processing by banks. The FDIC has refuted this allegation, claiming that the list has been misinterpreted.
Richard Osterman, the FDIC’s acting general, admits that the list has been “misinterpreted” by financial institutions. The FDIC states that the merchants on the list were just example categories and were not to be prohibited from payment processing. In fact, the policy encourages financial institutions to work with any type of business that is in compliance with applicable federal and state laws.
Republican lawmakers and others have publicly targeted the FDIC over the list. At a recent hearing, Rep. Patrick McHenry, R-N.C., grilled FDIC representatives over the list. Republicans claim that the creation of the list is just another move by the FDIC to keep certain businesses away from the payment system. Even though the FDIC has recalled the list, the organization still encourages banks and payment processors to be selective when dealing with new accounts.
Even though the FDIC has removed the merchant list, the banks are still highly critical of businesses labeled as “high risk.” The recall may allow a few more merchants to be granted access to bank payment processing. Still most legitimate businesses that were on the list could be subjected to stricter guidelines than most by banks and traditional payment processors. Entrepreneurs of high risk businesses should consider newer alternatives to traditional payment processors. Owners must research and vet reputable third party payment processors that know how to navigate their particular type of high risk industry.
EMB is the number one payment processor of merchants in the high risk industry. We offer high risk credit card processing, plus a variety of processing services that will protect your client transactions, and boost your revenue through strategic payment processing.