What the act
The law lacks teeth for financial services: the payment networks and payment processors. Financial institutions (banks and credit unions) are not the issue. There are over 9000 such institutions accredited by the FDIC and NCUA. If you are kicked out by your bank, it is fairly easy to find another. Brick and mortar banks have healthy competition, and banks like Old Glory Bank have been started recently specifically to provide banking services to risky businesses.
Lets focus on payment networks. Section 5 states:
SEC. 5. Payment card network.
(a) Definition.—In this section, the term “payment card network” has the meaning given the term in section 921(c) of the Electronic Fund Transfer Act (15 U.S.C. 1693o–2(c)).
(b) Prohibition.—No payment card network, including a subsidiary of a payment card network, may, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, prohibit or inhibit the ability of any person who is in compliance with the law, including section 8 of this Act, to obtain access to services or products of the payment card network because of political or reputational risk considerations.
(c) Civil penalty.—Any payment card network that violates subsection (b) shall be assessed a civil penalty by the Comptroller of the Currency of not more than 10 percent of the value of the services or products described in that subsection, not to exceed $10,000 per violation.
Pay special attention to (c). The penalty for violating this law is extremely weak and actually unenforceable.
- Card networks are only on the hook for 10% of the damages they cause.
- The penalty is capped at $10,000 per violation. Visa alone processed $16 trillion in 2024.
- The penalty is imposed by the Office of the Comptroller of the Currency, at their discretion. They are not required to impose a penalty, and they are not required to impose the maximum penalty.
- In 2024, the Supreme Court in SEC v. Jarkesy ruled that Administrative Law Judges (ALJs) are unconstitutional, so the OCC cannot use ALJs to impose penalties. They must go through the courts, which is a lengthy and expensive process. Unless it is politically expedient for them, the OCC would never consider pursuing a case against a card network.
What the act
The issue of payments is by its nature financial. To make the economic penalties effective enough to deter censorious behavior, there must be relief
avaailable to those impacted by the actions of the card networks and their partners.
