High Risk Industries Back To Life—Current Administration Terminates Operation Choke Point

Sep 19, 2017

President Trump’s administration surely deserves a round of applause for terminating the contentious Operation Choke Point, a repressive program that tortured many legitimate businesses.

The Federal Deposit Insurance Corporation launched this discriminatory operation when they categorized certain industries as “high-risk” due to the type of activities. This declaration sent a red light to all the banks it controls to shun doing business with such entities. Then things got worse in 2013 when the Justice Department began executing Operation Choke Point, literally intimidating banks and payment processors that write “high-risk” businesses with federal investigations.

At that time, the government’s actions were supposedly meant to track down fraudulent operations like the cable box descramblers, Ponzi schemes and debt consolidation scams. But it also went after a good number of completely legal businesses such as payday lenders, gun dealers, dating services, coin dealers, tobacco dealers, travel clubs and fireworks sellers. Consequently, many legit companies were cut off from financial services such as card processing, banking, payroll among others

According to a report on Oversight and Government Reform that was conducted by a House committee in May 2014, the operation used FIDC guidance to press investigation threats against lawful businesses. And all of a sudden, you could easily get summoned by the Department of Justice for agreeing to do business with a ‘high-risk’ merchant. Banks are caught in a tight spot; either withdraw from long-standing, money-making business rapports with fully certified and legal companies, or get arraigned in court by the Department of Justice.

However, banking representatives from California recently expressed their concern over the issue of data collection as well as other regulatory requirements. They also pointed a finger at Operation Choke Point for making them waste a lot of time and money on policing their customers.  Simone Lagomarsino, California Bankers Association’s President said he is surprised at how banks have been forced to act like they are the police.

Days later, however, banks found a reason to smile again. Last month, a group of congressmen wrote to the Department of Justice, the Federal Reserve and the currency administrator demanding that Operation Choke point be dismantled. Surprisingly, they got a positive response.

“We share the opinion that law-abiding companies shouldn’t be targeted merely for operating in industries that a given administration disfavors,” wrote the Assistant Attorney General, Mr. Stephen Boyd in response to the congressmen in Aug. 16. “All of bank investigations triggered by Operation Choke Point will now come to a stop; the program is no longer effective and won’t be operational again.”

This came as good news to the group of congressmen whose plea fell on dead years throughout President Obama’s administration. In a statement, the five lawmakers applauded Donald Trump’s Justice Department for ending the tyrannical Operation. They added that ending Operation Choke Point has restored the Justice Department’s responsibility to hunt for lawbreakers and not legitimate businesses. As a result, we expect to see more High Risk Merchant Accounts getting approved and retailers running their legit businesses without threats.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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