In recent weeks, multiple financial services have operated unjustly and purged hundreds of mature video games across multiple platforms. In the wake of these recent actions, citizens now more than ever recognize the imminent danger that these unaccountable multi-billion dollar corporations pose to our freedoms. In response, lawmakers in the Senate have proposed the Fair Access to Banking Act (S.401) which looks to challenge the practices held by these banking institutions. While the act is a step in the right direction, it is not the silver bullet we are currently looking for.
You may review the text of the bill on
Congress's website.
The Gordian Knot of Financial Services
Credit card transactions are difficult to understand by design. There are many layers of abstraction, with up to six different companies taking action between when the card is swiped and when the seller receives money, with each step being a potential bottleneck and single point of failure.
These six steps include:
- The Issuing Bank - The bank who issued you your debit or credit card.
- The Payment Gateway - the entity that captures your card information at the point of sale.
- The Payment Processor - the entity that receives data, processes the request, and does a fraudulent check
- The Payment Facilitator (PayFac) - the entity that maintains relationships with the Acquiring Banks on behalf of many merchants.
- The Acquiring Bank - the responsible party for underwriting merchants and settling transactions.
- The Card Network - the network that connects the Issuing Bank to the Acquiring Bank, such as Visa or Mastercard, and also sets rules and standards.
The original purpose of breaking up the system like this was to avoid antitrust liabilities. In practice, the payment networks have become a monolith acting with impunity.
Each of these companies maintains its own terms of service giving each of them the ability to block a transaction. Additionally, intermediary companies that handle card transactions are mutually and individually bound to the terms of every Card Network, so even if you never do business with Discover or American Express, you are still bound by their policies even if you want to accept Visa or Mastercard. You don't get to choose what card networks you patronize. If you want to do e-commerce, you must obey all of them.
When you are banned from processing payments, you will not be informed of the reasoning or by which point of failure it occurred. "Risk management" is considered a trade secret in the industry, expressing that you have no right to know nor the ability to sue to discover what has happened. These are private companies that have restricted any appeal process that may be in the best interest of their customers.
Card networks have enjoyed no new competition since 1985. As far as consumers are concerned, there is no difference between an American Express or a Visa card. Regardless of provider, the fees and penalties are offloaded to the merchants who have to let the gratuitous 3%+ fees eat directly into their profits, while consumers are blissfully unaware of how their payment method hurts the stores they buy from. Since merchants can not choose which card networks they accept, new competition does not even factor into how one network's censorship can impact another. Consumers already have their wallets full of debit and credit cards that are functionally the same with no reason to switch to a new network.
In this way, card networks and payment processors enjoy all the powers of a state-sanctioned monopoly with none of the downsides of a public-private utility. They can choose who they do business with, giving customers and merchants no real alternatives, while not being required to provide equitable access. They can block transactions for any reason with impunity and have been doing so for decades.
What the Fair Access to Banking Act does
The bill sets rules for a variety of financial institutions (banks and credit unions), financial services (card networks and their partners) and digital wallet providers (like PayPal and Venmo). Its definitions are broad and encompass all relevant services.
Its legislative intent is to prevent these companies from denying service based on "political or reputational risk considerations." Financial services have historically blocked businesses for a myriad of political reasons, including: abortion clinics, gun stores, fossil fuel industries, pornography and charities. Anything deemed controversial could find itself completely cut off from payments overnight.
In theory, this law addresses that and requires all financial services and institutions to provide services to all legal businesses and persons. They cannot discriminate based on a political or reputational risk.
In practice, the law only provides sufficient leverage against financial institutions (specifically banks and credit unions). Any FDIC members and NCUA members found to be in violation of the law would be banned from accessing the Automated Clearing House (ACH) network. This would effectively deny them the ability to transfer funds to and from other banks and create a strong incentive to comply and work with their members before denying them services.
It does not, however, provide sufficient leverage against the payment networks and their partners.
What the act does not do
The law lacks teeth for the financial services doing the most harm: 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 payment services violating this law is extremely weak and technically unenforceable.
- Card networks are on the hook for only 10% of the damages they have probably inflicted.
- 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 should do
The issue of payments is, by its nature, financial. The act looks to make the economic penalties effective enough to deter censorious behavior or otherwise make relief available directly to those impacted by the actions of the card networks and their partners.
Tenants of the Bill should be to:
- Provide civil relief to injured parties, allowing them to sue in federal court without permission from a regulatory body.
- Provide punitive damages on top of the full value of the services or products denied.
- Provide for attorney's fees and costs to the injured party should they prevail in court.
These would significantly shift the balance of power away from the card networks and their partners and back towards the legal businesses that they serve. Card networks would be heavily incentivized to work with their customers, provide human support, offer transparent appeals processes, and endeavor to quickly resolve disputes out of court before damages mount up. That is what Americans deserve.
Support this Bill, Encourage Your Representatives
Contact both your Senators. Senators represent your state at-large and you have a right to contact both. Encourage them to support S.401 and strengthen it by appending the provisions mentioned above.
Contact your House of Representatives member. S.401 is a Senate bill, but the House of Representatives can also introduce similar legislation. Encourage your representative to support the Fair Access to Banking Act and to advocate for stronger protections for consumers and businesses.
If you are a merchant or consumer who has been impacted by the misbehavior of the financial services industry, please share your story with your representatives.
Many people believe that writing to their representatives is futile, but representatives do take note of concerns from the general public. Their jobs are very comfortable and very profitable, so they will want to keep them.
Thank you for reading.
